Discovering IRAs: The SECURE Act

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Welcome to finishing well brought to you by Cardinal God… Certified financial planner belonged to Schild, best-selling author and financial planner helping families finish well over 40 years of finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes. Now let's get started with finishing well welcome to finishing well today show discovering IRA and now there's a sort of fresh wind and IRAs that will talk about it right on secure your enacted lingering in the House of Representatives and Senate over the Senate and it got pushed into a budget bill so it was just kind of a secondary thing put into skip the government open through Christmas day and then with that we got this correct which we talked back last summer but we got some fresh wind that we want to kinda discover that's going on with that but I do set this up with little bit understanding that a lot of us and we think of Isaac. You know, Abraham's son in the book of Genesis, you know, there's a verse there a bit and always thought was really strange that Isaac loved Esau because he loved this tasty venison if it's it's Genesis 25, 8.2 coming 2528 and as I really began to study that in Hebrew. I discovered that the real deal was that Esau loved his son because he was a hunter and inside these arcs name is the idea of hunting and hunting. Actually, for God's righteousness, and art. Interestingly, you'll find that in Esau's name as well and we know you did not play out the way we hoped with the whole area Harmon Stanton etc. etc. but the interesting thing that you will find in any hunter is that they are looking for righteousness. There's been looking for something to way to make things right.

However that may look and so with this whole secure act when I was thinking about this is fascinating to me that both Hans and that's why the people that are studying these things. They're not necessarily looking for. Was this a good or bad, but now based on this is a law right it is John Hans it's always confused because John Hans but what I think is is is really cool is here comes this new law, and so we need to set our sales based on how can we know affect our sales to the way that this thing is coming when it comes to IRAs. Yeah, we are sitting here with a friend. Not long ago the sins we mentioned that you can see the fog, government, and both Hans and I thought we and we really need to talk about this with basics of IRAs before we even get into the fresh wind so that you know you can get an understanding of how this is changed what's coming at us. Will you most IRA money was once in a 401(k) or other type of qualified plans along the way. People have large balances in an IRA. Typically, as they've rolled it over from their 401(k) plan work or like type plan and most folks don't understand this stuff as well as it should. Because that's kinda what we have the show and say don't really understand the implications. They know they haven't paid tax on the money. So you know it so and so an IRA, individual retirement account is money that is sitting there lease to traditional IRA is money that you never pay tax on the government has afforded you that tax break and for many years because there is a sense helping you or investing with you in your retirement. So you're creating a hunk of money that you can a one day live off pride and also one day pay taxes on.

Yeah. And so the government hasn't forgotten that tax debt affect their the really we've had shows on this before their partner with you in your IRA or if you still have it in the 401(k). It's very much like an IRA and you may have considered rolling it over, maybe not you can with some 401(k)s. You can just leave the money there for the rest your life but many folks they misconstrue what this holy. They view it as a savings account which it is during the pre-retirement years, but they continue to view it as a savings account for the rest of their retirement and the whole idea of required minimum distributions really bothers a lot of folks it it's like will now they're making me draw money out of my savings account or my IRA. And that's true in the secure act is something that the law has been changed and so will talk about that in a sec, but what an IRA is it's it's it's it's the type of account where it compounds you get interest or earnings on your account.

You don't pay taxes on that all along and you never pay taxes on the contribution. If it's her traditional IRA as a traditional IRA. When we mention Roth IRA we noticed a certain fog and a fog comes when the guy we were talking about. He said, or tax-free right will yeah that's right a Roth IRA is tax-free. So those of you that have one. You understand this, and he's probably got one and that's just where it differs from traditional IRA is you arty pay tax on that money you haven't paid tax on the earnings and you're never gonna pay tax on the earnings of rocks. So within IRAs. You have a traditional IRA and then you have Roth IRAs and you can convert a traditional IRA into a Roth in the when you do that conversion you go pale taxes, practice income, determine tax the good news once it's over there and I can pay tax on the earnings last and some of you have Roth IRAs that you just started as a Roth right from the beginning so you made a contribution as a Roth and you didn't take that as a tax deduction. You just simply put the money in their after-tax money and that's can remain tax-free.

The rest your life. If I had a Roth IRA.

RMD means nothing to me correct. If you have only a Roth IRA RMD meeting required minimum distribution correct or QCD doesn't mean anything to me. If I have a Roth IRA because that's a qualified charitable distribution as it correct so those two terms if you got a Roth IRA, don't apply. But if you have a traditional IRA. This become, you know, actually the required minimum distribution. Based on that you know the way you teach would not still not really affect me because I be doing more than that. Anyway, so if all your monies in a Roth even this new secure act, which would we go and start talking about that now. The secure act doesn't really have any effect on Roth IRAs other than to make him make the Roth option much more attractive right which is really ends up giving you more options in retirement. What does Solis talk about the secure act and I don't know if you've heard it called dad or something affecting your retirement, but it passed the house back in the spring in the House-Senate over the Senate in the Senate is just stating committee forever and ever and ever.

And we've been following it, knowing that this thing is a real possibility, probability and even if it never passed the guts of the border to show up in something like but anyhow it just they figured out a way to get it passed in the way they did. That is, they just slid it into the keep the government open bill that passed right before Christmas. This was just part of that whole thing and then Pres. Trump signed and it became the law and so that's what were talking about today but were knocking to try to give you a debrief on the whole secure act is there's lots of little things that get in here that were really knocking to talk about on the show or maybe on a later show we will want to focus on is really what is going affect her audiences folks on how one acts essentially how to set your sales because it is a new win and in you know, I don't see anything in this that I don't think you do either.

That's necessarily detrimental in less your on the stretch program.

Yeah so so what we can talk about on today's show is the fact that the age to start your required minimum distribution or your RMD. It used to be 70 1/2 and it's now 72 but the people to turn 70 1/2 last year in 2019.

You're unaffected by this but if you now if you weren't 70 1/2 year younger than that last year. Now you can use the age of 72 so there delayed by one to two years from now. On the till 72 to begin RMD's are required minimum distributions. In other words which that whole thing is very confusing to me before I was to the people in the government so that was part of the motivations is make this simpler.

Well, I mean the whole idea of I got this money and now you're telling me I have to take so much out every year. And the reason behind that essentially was there trying to get their taxes because when you take the money out will. That's one of the reasons is that they just want money sitting there untaxed when you're already in retirement.

The other reason is is like hello, your 70 or your older you've been avoiding tax on all this money creating this fund to produce income for you and now it's time for you to take at least some of it and so that that was the nut behind the law and what also what created this is there's many people in their 70s that are still working okay or search certainly in their late 60s and all you gotta do is go out and look around. I mean just people. People aren't retiring in their 60s now and mean some people are but a lot of people keep work so there just saying okay. We can delay this a little further give you the option to delay it to 72 and we can simplify so we want to remember that we are finishing well certified financial planner Hongqiao today show. Discovering IRAs is really comes from the chapter in Hans's book the complete cargo guide to planning for living retirement.

The chapter on IRAs and so if you want that chapter for absently freeing go to the Cardinal guy.com and and just click on the seven worries tab and then you find IRAs and you'll find loads information course it didn't have to do is correct.

Back then when you wrote that book that the good news is I happen to know this is trade secret. He's come out with a new book have always so we get that ready. Will let you know that as well.

We get a break but we come back discovering more of this setting is is Hans and I would love to take our show on the road to your church and Sunday school Christian or civic group. Here's a chance for you to advance the kingdom through financial resources and leveraging Hans expertise and qualified charitable contributions veterans aid and attendance IRA Social Security care and long-term care.

Just go to Cardinal guy.com and contact Tom to schedule a live recording of finishing well at your church Christian or civic group. Contact Tom to Cardinal guy.com that's Cardinal guide.com welcome back to finishing well certified financial manner.

Hongqiao, today's show were discovering IRAs and she heard us in the first segment documented about Isaac who was excited about his son who was a hunter and and if you've got a son like I do like wow you'd love to see things come out where they're actually looking for ways to improve right there. There were they looking for righteousness and and these are the kind of things that at slotted Hans Nino of their fathers would be very proud of them now.

Is there trying to find things in this new legislation and IRAs in order to find ways to benefit all of us as we finish well and you can see like oh my goodness. If you want to read this correct yourself. I mean like it a lot I realizes but Manda to be able to glean from the wisdom of these people are really just trying to set things right here. Here's what this looks like now that we know have a fresh wind coming our way through so much in their insecure act is that when I can build a cover this on one shows were to be talking about it for a few Saturdays talked a little bit about the delay.

That's insecure act that you can wait from 70 1/2 to 72 to start your RMD's are some qualifications on that but he just they've moved that they made it simpler. The next thing is they've given in 401(k)s which are similar to IRAs and a lot of 401(k)s get rollover into our IRAs or they get transferred into an IRA and what they've done is they've given employers who are fiduciaries of 401(k)s protection or they've just legitimized annuities being in 401(k)s is an option you always been able to have them in IRAs, but this new secure act is now. Allows and legitimizes annuities so security itself is like a superbright annuity so there's a there's money that you're putting into an account that at some point in time will keep paying you a get out until you die and he can pay you much more than you paid in right so you know a lot of people got way more out of so security to make a put in it and and that's great. So essentially, an annuity, you can now take your 401(k) or in other words, you got an employer whose is helping you invest money into your retirement account in a 401(k) and so apparently the employers were held liable like you know as a fiduciary. They had certain responsibilities as far as helping you figure out where you end up with that money within your 401(k) and what they are now saying is it that the employers need to take an and not worry about any exposures or not any but there taken a lot of the worry off the idea of annuities are really good thing because pensions are will see is people more reading this stuff, or were hunting for things. I mean, this provision just simply just more legitimizes annuities is a place in retirement plans okay and it just means you most people view their IRA or their 401(k) or tax deferred savings as a savings account and it's there for them to draw on. Should they need to and that's true.

During the accumulation period, and it's true in retirement.

This not really what it was set up for coming up 401(k)s and IRAs are really there to create an income for you in retirement annuity can illuminate that fear where you can create an income stream that can outlive so if you live up in your 90s, late 80s, 90s even passed 100 and just as long as you live. It's can be sending you a check every month is alarming to me. This is really beautiful because here your employer now is helping you set up this fund were not only you can have your social security come into you every single month but it's almost like you had a super pension right there in the day when you had pensions were like okay for the rest of your life. Doesn't matter if you live to be hundred and 20 you're going to be getting this amount to go on top your Social Security and and and and's essentially you know really take the worry out of out of stopping your money paying job and willing to deal even if your spouse outlives you, they can provide for that in an annuity as well so your spouse will get the same amount.

So it just really to secure act just legitimized annuities in a 401(k) is not an all or nothing thing is is that you know those of you that have 401(k)s know that you can allocate certain amounts to certain investment options, and so comforting allies Jesus and begin preparing during the same many years easily confused.

I'm wondering now so if I'm taken my money out in its pretax I'm paying tax on this income and my employers can help put more money into it to. And that goes into an annuity is at annuity going to be taxed when it comes back. Sure, okay, sure mean the the monthly checks for the annual checks will be taxed. But what I'm saying is not an all or nothing thing you can you know if you're putting thousand dollars a month into your 401(k) you can allocate 50% of that to an annuity and select from a assortment of them and then the other half can be put into a mutual fund or something like what if I throw another rent at six, I think you know what if I put it does can I put annuity in a Roth IRA and that way pay tax on it ahead of time.

I got the money coming back it was and Street really yeah oh well, there's the answer.

So yeah so tell your employer hey I want this into a Roth annuity right will yeah I'm most 401(k) plans now have a Roth option. It's already in progress. Yeah so so so there really is no such thing as a Roth annuity or a traditional IRA annuity. I mean it's it's it's it's just a vehicle for holding money that indicates whether there's going to be taxes due later on this money are not.

So I actually have money in a Roth IRA annuity alarming is the beautiful thing is what I'm what I'm thinking is like oh my goodness, look, if I put my employers help me pay this and put this money in an impaired tax on it when I put it in so is not your get away with your paying the tax on the seabed that we talked about before, rather than paying tax on the harvest secure act is delayed, the RMD's required minimum distributions.

They moved from 70 1/2 to 72 and then it had an effect. Let's just say on the use of annuities in 401(k)s and IRAs and it legitimized them.

There's been some just concern whether these are a good thing or not. And this is the really the government just saying were going to legitimize it as an option and then it also where it affects the viewers of our show is with Q CDs they protected the age 70 1/2 for starting to utilize two CDs okay and you say what in the world is a QCD acute qualified charitable distribution and we talked about this on several shows. So if you've got money in a traditional IRA and you don't want to pay the taxes or you don't need the income, or both.

You can donate directly from your traditional IRA to the charity or to the church and you can do this up to $100,000 in a given year. So you could make a sizable donation to your church and never pay taxes on the money. Okay, there's a bunch of qualifiers on Wimberly run out and doing this would have another show or will just talk about Q CDs because of its time to talk about them again, but just in principle you're able to give money directly from the IRA never shows up in your tax return okay and Dick that secure act didn't change. You don't have to wait till 72 now to start doing Q CDs. If your turn 70 1/2 this year. In 2020. You can do a Q CDs this year okay and if you want more information on that.

Just call me or go on a cardinal guide.com and send me a message I'll be glad to talk about it. You can also read about them in my books so mean there's much more than three topics in the secure acts are working to talk over several shows about the secure act, but what we talked about today are the effect of just the delayed RMD's that you can go from 70 1/2 to 72.

You can wait. Secondly, we talked about the use of annuities and 401(k) plans and IRAs, and we talked about the fact the Q CD remains unchanged that you can start those you know as long as your 70 1/2 that you can do that. So as promised story for us that you can wear yeah I mean II just II think of the you know a gentleman who is a CPA that we talked about on the show before who's just been diagnosed with ALS and he is sitting there living off of their Social Security so he's effectively paying no taxes. He's really proud of the fact that he's got this money accumulated and is now IRA that what used to be a 401(k) that is not taken any money out of answers not paying taxes and you know he's in effect delaying RMD's in.

You know he's only 63 years old and so he's delaying the RMD's really because this money is going to pass to his wife.

She's given the Lamb delayed's now 72 that all looks like a great thing to a CPA in the planning advice that I've given them is leaving all your money in the IRA through all these years is not necessarily meant smart because it age 63 he could take out $20,000 out of his IRA last year and he actually did that. He withdrew $20,000 because there's a certain amount of money you can pull out your IRA. If you're over 59 1/2. If you don't have any other income besides Social Security and pay no taxes so why would you just delay this taxation.

Further, when you can make a withdrawal in your 60s and pay no tax write does when you're 70 half or if is when his wife 70 half sheet she might be affected by that. So you know again that's incident taken advantage of the tax rates where they are and paying tax on the seed rather than or no tax of this case on the seed rather than hard yeah I mean it's even better than that any just so so so so the moral of that story or the learning and that story is just because they let you delay required minimum distributions to age 72.

You may not want to take advantage of that fact, we have to look at everybody's individual situation, but many times it's best to start the tax paying earlier and spread it over several years and perhaps just converted to a Roth. That's an option or just take the money out and put it into a savings account or take the money out pay the taxes. What little tax there is and spend it and enjoy. Out all right. You can find out more with sconces book the complete cardinal guide to planning for living retirement which, again, the shows brought you by cardinal guide.com see put in their cardinal don't forget the guide.com and there you can find seven words tab, you can email Hans just as for the book. All that is a cardinal guide.com thank you for wonderful time discovering IRAs. Thank you. We hope you enjoyed finishing well brought you by cardinal guide.com visit cardinal.com for free downloads of the show previous shows on topics such as Social Security, Medicare and IRAs, long-term care and life insurance, investments and taxes as well as constant best-selling book, the complete cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows you get Hans book go to cardinal guy.com if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word. Once again, that's cardinal guide.com cardinal guide.com