0:00:00 - Speaker 1

Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker-dealer member, FINRA, SIPC Advisory Services through Cambridge Investment Research Advisors Inc. A registered investment advisor. Cambridge and Greenway Wealth Advisory are not affiliated. It's time to dive into some insider secrets of investing and retirement planning To make your retirement as smart and as elegant as possible. This is Money Chic with Sherry Rash.

0:00:31 - Speaker 2

Welcome into another edition of Money Chic, women and Retirement. With Sherry Rash and myself, we're going to break down an article from the Hill I'm not quite familiar with that, but it paints the EARN Act and we're also going to talk about the EARN Act, which is Enhancing American Retirement. Now, I guess it's kind of the version of the Secure Act 2.0. It's kind of a scathing little article that they wrote about this and some of the points. What I want to do, sherry, on this episode, is just kind of look at some of the ways they, I guess, focused on the EARN Act and just see what your thoughts are about some of the things that are being proposed in this act and if maybe their criticism is as warranted as need be. Does that make sense? First of all, hi, how are you doing?

0:01:15 - Speaker 3

I'm good Hi. Yes, they're not a big fan of this EARN Act, but I think that we're going to do a good job of removing some of the emotion and just looking at the facts of the bill and how it can really help a lot of people for retirement.

0:01:30 - Speaker 2

Well, so just kind of a little quick thing. As I mentioned, it is the kind of the Secure Act 2.0, which, that is a reminder for folks came in what? The end of 19, sherry, that's when they put that through I think going into 20. And that was the setting every community for Retirement Enhancement Act. First of all, I want the job. This person, like whoever the czar of acronyms are, you know, in the government, the EARN Act, the Secure Act, I mean, you know.

0:01:56 - Speaker 3

Do they come up with the acronym first and then find words?

0:02:02 - Speaker 2

COVID, we had what the CARES Act right.

It's always something right, and they all stand for something so anyway that was passed that kind of did some things that removal of the stretch IRA, which was a big piece of the Secure Act that a lot of advisors weren't fond of. But then there were things, like you know, moving the RMDs from 70 and a half to 72. We've talked about some of those things. So, anyway, this is kind of possible. This is not passed, by the way, folks, this is just this is out there as something that they're looking at doing, but anyway, this is kind of an addendum, if you will, to that and maybe kind of an add-on. So let's just jump into some of the key points of the article, sherry, and let you break it down and see what you think. Since I mentioned the RMD in the 72, that is kind of the lead focus of the EARN Act. It is to push that now, those RMDs to 75 for three extra years of tax growth. What's your thoughts on that?

0:02:52 - Speaker 3

Well, first, I think this EARN Act, if we look at it within the view or the mindset of it, provides more flexibility. If we think of it as it provides more flexibility, I think that we will better understand what they were trying to achieve with this. So, like you said just recently, rmds went from 70.5 to 72, which I was a big fan of, because calculating a half in someone's age wasn't exactly the easiest thing to do so, or when you need to take RMDs based on your 70.5 birthday.

So I appreciated the shift to 72. But now the shift from the proposed shift from 72 to 75,. Yes, it allows for three extra years of tax-free growth, but what those that are against the bill say is that, well, most Americans start living off of their accounts well before 75, and this benefit only affects the wealthy.

0:03:49 - Speaker 2

Okay fine.

0:03:52 - Speaker 3

But what it does allow is that with so as a reminder with RMDs required minimum distributions this is a calculated number that you have to withdraw from all of your retirement accounts when you are of that age, and then that number essentially gets bigger each year as you get older. So what this allows is by pushing it from 75 to 72, the bill's not saying you can't withdraw from your IRA, it's just saying you don't have to start taking that full amount until 75.

0:04:25 - Speaker 2

That's a great point. Yeah, it's not like you have to wait.

0:04:29 - Speaker 3

Right, you don't have to wait, but it allows the flexibility if you want to.

If you want to, or conversely, I have a lot of clients that you know they're not. They don't love the idea of the RMD because it forces them to do something. Or let's say, when you're doing your retirement income plan and you only need $3,000 extra a year in in addition to what social security or a pension provide you, but your RMD is $5,000, you have to take that RMD Right. Well, now you don't have to take that full $5,000. You can take the $3,000 and let that difference continue to cook and earn in your account. So it's just allowing a little bit more flexibility, because not always do we need that full RMD amount, but we have to take it.

0:05:16 - Speaker 2

Yeah, and there's so many other things you can do with these, right, I mean so, and we've talked a little bit about them and we'll obviously bring them up again.

But I mean, if you I think part of the article is is definitely painting it as though the urn act is for the uber wealthy, and I think that's a bit of the, that's kind of there. I think that's their stance, it comes across a little harsh and it's like, okay, these are just options. It doesn't say to your point yes, might it benefit folks who are a little bit better off? Possibly, but isn't that the case with just about any rule, right? So, taking a look at that and saying, okay, well, you know what, you don't need the money. You could still do your QCD, like, if you're chairably minded, you could still do a qualified charitable distribution to satisfy that RMD. You could also, if you don't want the idea of RMDs period, as you mentioned, you could start converting prior to these ages and convert that money to a Roth, for example, and then you don't have RMDs. So there's lots of things you can do.

0:06:09 - Speaker 3

I would say no one is excited to start taking RMDs. Whether you have $10 million or $100,000, the idea of an RMD is not exciting for anyone and no one really enjoys or appreciates it.

0:06:23 - Speaker 2

But the government wants their money, right, they want their tax money.

0:06:26 - Speaker 3

They want their tax money. And also, the RMD is really designed. The calculations that they come up with is really designed to bring your account value down to zero. That's what it's designed for, so the government can get all of their delayed tax revenue.

0:06:39 - Speaker 2

They've been waiting 40 years for it or whatever Exactly.

0:06:41 - Speaker 3

Exactly so. This pushing it to 75, all it allows us for a little bit more flexibility. So you don't have to take, like I used the example for you don't have to take your full 5,000. You can just take what you need for that year.

0:06:54 - Speaker 2

Yeah, and some might say well, we know we need tax money. We know we need tax revenue because we've spent so much in our $30 trillion debt, so why would they push this back? This just delays them getting money. Well, it also makes those accounts bigger, to your point, potentially, right. So I mean, there's lots of ways of looking at it, right? So, again, this article and we'll put a link to the article in the notes as well show notes as well if you'd like to check it out. So we're just going to go through some of the highlighted points here. But the next one it also kind of I don't know they close the throws another bone to taxpayers rich taxpayers, is how it words it with this additional proposition of $10,000 in savings allowed between 60 and 63. So first, I guess we should set this up, sherry, with the catch-up contributions that we're allowed to do at the age of 50, right? So if I'll have you explain that, and then, basically, this is just another addition to that and it's very limited.

0:07:48 - Speaker 3

It is so you can have a catch-up contribution into your IRA or 401K and the catch-up contribution so workers that are 50 and older can contribute an extra $6,500 per year to their 401K, which brings the total 401K contribution up to for this year to $27,000. So you can contribute an extra $6,500 a year if you're over age 50. If you're under 50, you can contribute $20,500 to your 401k.

0:08:26 - Speaker 2

And that's always there. Now this ARNAC is doing this other thing, this bone that they're talking about, and they're saying from 60 to 63, you could drop another. So basically it's 30 grand.

0:08:37 - Speaker 3

You can contribute Exactly.

0:08:38 - Speaker 2

Yeah, in three years.

0:08:39 - Speaker 3

Raising it slightly another $10,000 in savings for 60 to 63. But again, it allows you the flexibility of saving a little bit more. You don't have to do that full $10,000. Maybe your budget allows you for an extra $500 a month. Great Contribute. It's not forcing you to save that $10,000. And to tell someone that they have to save an additional $10,000 in a year. A lot of people aren't able to do that, so that's fine. But again, it allows you the flexibility of saving just a little bit extra.

0:09:14 - Speaker 2

And again, I think that's the negative tone that the article takes, because it's like well, most Americans can't afford to do that, okay, that's fine, it's just there If you can afford to take advantage of it. And let's be honest here, it's $30,000 over three years, from 60 to 63. It's not exactly. That's like it's probably going to make or break your retirement strategy, Right, it's 30 grand.

0:09:33 - Speaker 3

But it could be helpful. Every little bit helps. I think we say this every. Almost every other podcast is every. Every little bit you're able to save helps.

0:09:43 - Speaker 2

So to kind of again, to kind of put it on well, it's only for the Uber wealthy is a little bit of a misnomer, right, in my opinion. Anyway, on this I'll take the article. So let's get, let's continue going. I think you're doing a fantastic job breaking this down for us. The article takes a very negative view as well.

0:09:56 - Speaker 1

This one's interesting of the Roth IRA which everyone seems to love.

0:10:00 - Speaker 2

So I'm really curious about this. It includes a quote from senior fellow named Stephen Rosenthal at the tax policy center that says I've seen every gimmick in the book and Roth IRAs are the worst. This is a kind of a headscratcher.

0:10:14 - Speaker 3

I read this quote many times, I read the article over and I'm so well one tax free withdrawals in retirement. If that's a gimmick, I'll take that gimmick every day.

0:10:27 - Speaker 2

If it's the worst, gimmick right.

0:10:28 - Speaker 3

That's the worst gimmick. I'll take it all every day. And so I think what he's trying to say is because with Roth IRAs, you have to pay the tax now, so you pay the tax once and then it's taxed never again, with the caveat of as long as you follow the rules of the Roth IRA right. But if you contribute $6,000 to your Roth IRA today, you're doing it with after tax dollars, and then, if that's 6,000 grows to a million dollars and you follow the rules of the Roth IRA and you make a withdrawal in retirement, you are not paying taxes on that growth. I think what he's trying to say is it's a way to because you have to pay the tax now, it's a quick way to get some tax revenue. I feel like that's what he's trying to say with that, because you're paying the tax now and not getting that tax deferral and then paying taxes later. Yeah, this was a headscratcher for me.

0:11:26 - Speaker 2

I couldn't get it, I couldn't figure out. It's like, okay, the government's getting the tax revenue now by when you contribute to RALTS, right, because you're paying the tax upfront as it's going in, then you have to benefit later on in retirement, if not, so I don't know. It's like you can't have your cake and eat it too, I suppose.

0:11:45 - Speaker 3

Yeah, If anyone knows can understand this, let us know.

0:11:49 - Speaker 2

Sure yeah.

0:11:51 - Speaker 3

And because we're. I'm a little confused on this, but I would respectfully disagree. I think Roth IRAs are fantastic.

0:11:59 - Speaker 2

Yeah, and feel free to stop by the website and drop, share and email GreenwayWealthAdvisorycom. Greenwaywealthadvisorycom. Yeah, again, that's the problem, I think. But again, I'm not familiar with this publication or whatever the hill, but they just seem to take a very kind of negative stance of almost like well, if you have any money, that's just bad and it's like okay, isn't that like we're supposed to take care of ourselves in retirement, because there really aren't pensions that often anymore. That's part of the secure act, that's part of these different things that they're putting in places so that people can provide for themselves in retirement, and this is a great tool by most people's accounts. So again, anyway, very interesting.

0:12:39 - Speaker 3

Removing the well we talked about last podcast. Removing the emotion from money is very important and I think that this is also important. Anything that comes out of the government tends to be emotionally fueled, right when we look at it, depending on where it's coming from. It's not supposed to be, but it is. So we just have to remove the emotion and look at the facts of it.

0:13:03 - Speaker 2

I think is important. Maybe Mr Rosenthal is just upset because it was not maybe initially that the Roth IRA was not named after him. Maybe he's not a fan, because I believe Roth are named after a senator as well.

0:13:15 - Speaker 3

It is actually when I drive to Delaware. I believe there's a bridge named after the senator. The senator as well. The Roth name.

0:13:22 - Speaker 2

Roth, yeah, maybe he was up for it. He didn't get it. That's why he's upset. I don't know, I'm just kidding. Okay, so one more here, sherry, on this article. It eventually acknowledges the bipartisan support for the bill and provisions for average households. It says, with expansions of things like the tax savers credit and automatic worker participation in employee retirement or employer retirement plans. This is something that was kind of in the Secure Act as well. There's a little bit more there where it's trying to make it easier for people to be automatically set again to pay for our own retirement, to be automatically enrolled in these things. So at least it did have a little bit at some point of a bipartisan conversation piece.

0:14:03 - Speaker 3

Yeah, at the end of the day it was bipartisan support for this bill. It helps with tax saver credits you can get more tax credits for contributing to a retirement plan and then also having employers an incentive for employers to automatically enroll their employees in their retirement plans, which I think is a good thing. When the shift from pensions to defined benefit, to defined contribution, so from pensions to 401Ks, 403bs, it happened rather quickly and I think it also happened with a lack of education, employee education, so, and I still feel like there's not enough education about the benefits of contributing to your employer retirement plans. You know, obviously the main benefit is that's the way you save for retirement. But now the incentive for employees to be automatically enrolled, I think we'll get people contributing that maybe had intentions of doing so but never just didn't know how to do it or how to go about it or what to choose or what have you. So I do think that that's a good thing in all.

0:15:12 - Speaker 2

Yeah. So again, we'll post the link to this so you folks can read it as well, if you'd like, and if you feel like again, as Sherry mentioned, if you'd like to chime in on your thoughts on it, feel free to drop her an email and have some debate or whatever the case might be, but we try to bring some interesting information and insight. Looking at things, could there be some positives? Absolutely, could there be some negatives? I think that's always the case with just about any proposed legislation there's always gonna be pros and cons, ebbs and flows. So with that we'll let you go.

Sherry, thanks for hanging out with us this week. Again, if you've got questions or concerns and not all of this is pushed through, by the way, just yet, but it is still a 72 for RMDs as of this time but if you do have questions about RMDs and how to be as efficient with those as you can be or need to be, make sure that you're reaching out and talking with Sherry or a qualified professional. Before you take any action on something you hear on the podcast or any other podcast, really, or any other show, without talking with a qualified financial professional like Sherry Rash at Greenway Wealth Advisory, stop by the website greenwaywealthadvisorycom. Greenwaywealthadvisorycom. Don't forget to subscribe to us. On Apple, google, spotify, iheart Stitcher, you can type in Money Chic, women in Retirement in the search box of those apps or just find it all at her website. Sherry, thanks for hanging out. Have a great week. This is the end of July for us, so I'll see you in August Sounds good, thank you.

0:16:29 - Speaker 3

It's good and hot so it is nice and hot.

0:16:33 - Speaker 2

We'll be back in August with a little bit more conversation, hopefully some good conversation about retirement as well, and we'll see you next time here on Money Chic Women in Retirement with Sherry Rash.

0:16:49 - Speaker 1

Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker-dealer member, finra, sipc Advisory services through Cambridge Investment Research Advisors Inc. A registered investment advisor Cambridge and Greenway Wealth Advisory are not affiliated.