CHANGES ARE HERE FOR IRAS & 401(K)S But Do They Offer Everything You Deserve?
If you follow financial news, you’ve likely heard about recent and upcoming changes to 401(k)s and IRAs.
Take Required Minimum Distributions (RMDs), for example. The new age minimums affect when you must start withdrawing your RMD from your account. Since the passage of the Secure Act of 2019 and then Secure 2.0 in 2022, the RMD minimum age has gone from 70 ½ to 72, and it’s now 73. The rules are somewhat complicated, but as a recent CNBC* article explained, “If you turn age 72 in 2023, you can delay RMDs until age 73. But if you turned 72 in 2022, you needed to take your 2022 RMD by April 1, 2023, and your 2023 RMD by year-end.” If you think you’d rather just skip taking that RMD? Uncle Sam will not go hungry — with updates in the Secure 2.0 act, the government collects a 25% penalty on the amount you should have withdrawn. Roth IRAs, on the other hand, do not have RMDs, which is one of the reasons that people opt for these accounts. But Roth IRA contributions are limited for high-income earners, and the plans are completely unavailable for those above a certain adjusted gross income threshold. Other traditional accounts are seeing improvements, like Roth 401(k)s. This year marked the first time employers were able to contribute matching funds into an employee’s Roth 401(k) account (previously, employers’ matching dollars had to go into a traditional 401[k], despite the employees’ dollars going into a Roth 401[k]). And starting in 2024, RMDs are going away for Roth 401(k)s. This is just a handful of the changes we’re seeing in the traditional account space. But even with these changes, the question lingers: Why settle for good (traditional accounts), when you can enjoy great (properly structured, max-funded Indexed Universal Life policies, which we call IUL LASER Funds)? WHY SETTLE FOR LESS SAFETY? When the market goes down, the value of traditional and Roth IRAs and 401(k)s goes down, like it did for millions of Americans in 2008, when they lost 40% of their account value in a single year. IUL LASER Funds are protected by a 0% floor when the market tanks. WHY SETTLE FOR LESS LIQUIDITY? With traditional IRAs and 401(k)s, you’re hit with a 10% penalty for withdrawing money before age 59 ½, on top of the taxes you owe on that money. With your IUL LASER Fund, you can access your money tax-free (via policy loans), penalty-free (as long as you don’t surrender the policy), and at any age (plus, there are no RMDs, so you can keep your money at work in your policy for as long as you like).
WHY SETTLE FOR LESS PREDICTABLE RATES OF RETURN? Traditional accounts put your money actually IN
the market, where its fluctuations can take your hard- earned dollars for a roller coaster ride of gains and losses. IUL LASER Funds have historically earned average annual rates of return of 5% to 10%. And even during down years — because your money is merely LINKED TO the market — you have the predictability of that 0% floor, granting you the peace of mind of knowing you won’t lose a dime due to market volatility. WHY SETTLE FOR FEWER TAX ADVANTAGES? With your traditional accounts, you’re taxed on the money you withdraw, and when you pass away, your beneficiaries will also pay taxes on the money they withdraw. With your IUL LASER Fund, when you access your money via policy loans, the money you borrow is tax-free, and when you pass away, your beneficiaries will receive your death benefit income-tax-free. While it may be beneficial to include traditional accounts in your retirement plan, IUL LASER Funds continue to offer superior advantages, which is why more Americans are making them an important part of their balanced financial portfolio (even initiating strategic rollouts from their traditional accounts). If you haven’t already, we invite you to explore what an IUL LASER Fund can do for your Financial Dimension.
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*Source: “Retirement withdrawal rules are ‘crazy’ this year, IRA expert says. Here’s what you need to know”, CNBC, October 25, 2023.
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