401K rules are changing

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sophie
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401K rules are changing

Post by sophie » Sat Dec 21, 2019 8:12 am

https://www.wsj.com/articles/significan ... 1576843201

Oddly, it was hard to get specifics from these articles, but I gathered that there are two provisions that are relevant for this board:

- After 2019, RMDs start at age 72.5, rather than 70.5.
- The age 70.5 limit for contributing to a tax-advantaged account is repealed.

There is also some form of "encouragement" for 401K plans to offer annuities. I'd really like to know who bribed whom on this one. Without any provision for a government guarantee, or some sort of insurance requirement in case the annuity fund collapses or the company goes under, this is potentially dangerous. Also, why is this needed? The average John Q Investor who doesn't want to manage their portfolio can just go with target date funds. Those can be turned into annuities later if desired. Paying annuity fees throughout the accumulation years is just a way to drain yet more fees from investors. Also, how is this going to solve the problem of John Q Investor not saving enough, which is the real issue here?
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jhogue
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Re: 401K rules are changing

Post by jhogue » Sat Dec 21, 2019 9:09 am

1. The legislation is called the SECURE Act. The advertised aim is to encourage retirement saving. Whether it would actually do this is arguable.

2. I think that Sophie's instincts are correct. Those most likely to be made more financially secure by the provisions of this law are insurance salesmen peddling annuities with high fees and commissions.

3. Some people over at Bogleheads who have tried to discuss the merits of the SECURE Act have had their threads locked or shut down because of the group's rule against political discussions-- which includes impending legislation not yet enacted. Will Bogleheads re-think this rule?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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rocketdog
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Re: 401K rules are changing

Post by rocketdog » Tue Dec 31, 2019 9:36 am

The other change is the elimination of the so-called "Stretch IRA":
https://www.kiplinger.com/article/retir ... heirs.html
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mathjak107
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Re: 401K rules are changing

Post by mathjak107 » Tue Dec 31, 2019 10:34 am

it makes little sense to stick an already tax deferred product in a retirement account and take up valuable space
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