FA Magazine May 2023 - Page 35

Leslie Geller , senior vice president and wealth strategist at Los Angeles-headquartered Capital Group , says women and their advisors should welcome the SECURE 2.0 Act .
“ SECURE 2.0 , far more than the original SECURE , presents more options and opportunities for different people to save for retirement differently . And I think it ’ s especially impactful for women because saving for retirement is far less of a one-size-fits-all approach for women and finances ,” she says .
Areas of SECURE 2.0 could play into a woman ’ s investment style , Huisking and Geller say , and financial advisors should use these opportunities as a reason to sit down with their female clients and advance a conversation .
They say the following provisions of the SECURE Act should be of particular interest to women :
• An age increase for required minimum distributions . Of all the changes , this one has gotten the most press , Geller says . In 2023 , the age that triggers the dreaded RMD rises to 73 , and it goes up to 75 in 2033 . That ’ s only a minor increase for today ’ s 72-year-old . But for women who are 62 this year or younger , it ’ s a much more significant bump .
• Catch-up contributions for 401 ( k ) and 403 ( b ) plans , governmental plans and traditional IRAs . Catch-up contributions are especially helpful for women who took time out of their careers for child-rearing , Huisking says . While clients can ’ t make up for the lost time value of money , the next best thing is that they ’ re able to salt away more assets starting now to grow through their retirement . All forms of catch-up can be used to cover career interruptions and anticipate a woman ’ s longevity .
The adjustments to catch-up contribution will take two forms . One is a typical increase in the extra plan contributions workers can make to an employer plan . In 2023 , employees 50 years old and up can make a catch-up contribution of $ 7,500 on top of the $ 22,500 maximum regular contribution .
The second adjustment is a brandnew initiative for employees 60 to 63 . Beginning in 2025 , they will be able to contribute 150 % times the typical catchup or $ 10,000 , whichever is greater .
• A new provision allowing 529 plan funds to be rolled over to a Roth . The SE- CURE 2.0 Act now says that if a child has not tapped the funds in their 529 college savings plans , their parents can roll up to $ 35,000 into a Roth IRA , free of taxes and penalties .
• New benefits for part-time employees . According to statistics from the U . S . Department of Labor , 64 % of parttime workers are women . Beginning in 2025 , employers will have to make their 401 ( k ) plans available to long-term parttime workers , and that will be a boon for women who are working part-time to care for young children . In the long term , part-time workers will be defined as those working at least 500 hours a year for at least two consecutive years .
• Automatic enrollment in retirement plans . Beginning in 2025 , employees will no longer have to actively opt in to new employer 401 ( k ) or 403 ( b ) plans . This is an excellent provision for women that allows them to take advantage of the time value of money . The deferral amount will start at 3 % in 2025 and increase 1 % a year to 10 % unless the employee opts out .
• A new provision that allows people to save for retirement while paying off student loans . If an employee is still paying off a student loan , she can now get an employer matching contribution on her repayments to a retirement plan such as a 401 ( k ), 403 ( b ) or 457 ( b ), even if she ’ s not contributing to one . These contributions , beginning in 2024 , could mean she ’ d be able to pay off student loans and start saving for retirement at the same time .
Huisking and Geller note that the legislation contains numerous new provisions that allow account holders to access account assets for emergencies .
Huisking and Geller note that the legislation contains numerous new provisions that allow account holders to access account assets for emergencies . For instance , the law now waives penalties for account holders making early withdrawals when they are facing a terminal illness . There are also waivers for domestic violence victims and penalty-free emergency withdrawals of up to $ 1,000 per year .
“ This access to savings for hardship , for illness , domestic abuse or disaster gives clients peace of mind that they can prioritize savings knowing it ’ s not inaccessible if something comes up ,” Huisking says . “ The concept of securing our retirement is about having more security , more flexibility , more control over the future . SECURE 2.0 gives us that control knowing that getting to retirement is not set out in clear stages for women .”