SECURE Act 2.0 & Retirement Plans: What You Need to Know – Episode #447

America is facing a retirement disaster. Surveys have found that only 75% of non-retirees have any retirement savings with only 40% feeling that their retirement savings are on track. Can anything be done to prevent catastrophe? On this episode of the Dentist Money Show, Ryan and Matt look at the SECURE Act 2.0 and the benefits it adds to 401(k), IRA, Roth, and other retirement plans. 

 

 

 

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Podcast Transcript

Ryan Isaac:
Hello, everybody. Welcome back to another glorious episode of the Dentist Money Show, brought to you by Dentist Advisors, a fee only, no commission fiduciary, comprehensive financial advisor just for dentists all over the country. Check us out@dentistadvisors.com. Today on the show, Matt and I are recording on Friday the 13th. So scary, and we’re talking about something very scary called The Secure Act 2.0. It’s actually a bunch of new rules that’ll be coming out over the next decade that will impact things like your 401 [k], your simple IRA, people taking out money in their 70s, catch up contributions, Roths, 529, kids savings, and a couple other things.

Ryan Isaac:
So we’re breaking these things down as much as we know with some other statistics that have been put out as part of the goal of this plan to help people save more money for retirement. That includes our clients, dentists, and our client teams. So we’re talking about that today, Secure Act 2.0. Thanks Matt, for doing all the prep on this. If you have any questions for us, dentistadvisor.com. Tons of content on there, and you could book a free consultation and get some money questions answered by a friendly dental specific financial advisor. And anyway, thanks for being here everybody. Enjoy the show.

Announcer:
Consultant Advisor, conduct your own due diligence when making financial decisions. General principles discussed during this program, do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now here’s your host, Ryan Isaac.

Ryan Isaac:
Welcome to the Dentist Money Show, where we help dentists make those smart financial decisions. I’m Ryan and I’m here with the guy. With the guy. Not a guy, the guy. Matt. What’s up, man?

Matt Mulcock:
Yo, Ryan. [laughter] I always feel extra energized when we are in person. I…

Ryan Isaac:
Staring. Knee to knee. We are knee to knee.

Matt Mulcock:
I pulled up. I pulled up to the office today. You were getting out of your Uber.

Ryan Isaac:
Yeah.

Matt Mulcock:
And you immediately started walking towards my car. [laughter] And I was like…

Ryan Isaac:
Was it aggressive?

Matt Mulcock:
No.

Ryan Isaac:
Okay.

Matt Mulcock:
You just like got out. You saw me. And started coming towards me and without even thinking, I moved my bag. [laughter] It was on my front seat. I moved it to my back seat.

Ryan Isaac:
You just went.

Matt Mulcock:
Because I knew you were hopping in.

Ryan Isaac:
We knew.

Matt Mulcock:
You opened the door and you were like, coffee. And I was like, yes.

Ryan Isaac:
Yes, please. And then you just turned on a comedy podcast. And then the morning started good.

Matt Mulcock:
If could we give them a quick plug? They’re friends of the show. They’re friends of the show.

Ryan Isaac:
Yeah. They listen to our show.

Matt Mulcock:
I wish.

[laughter]

Ryan Isaac:
That’d be so sick.

Matt Mulcock:
I wish SmartLess. It is…

Ryan Isaac:
What a great name too?

Matt Mulcock:
Incredible. So funny, anyway.

Ryan Isaac:
I liked how self-deprecating that name is too. And they’re very intelligent people.

Matt Mulcock:
Oh, it’s Jason Bateman, Will Arnett and…

Ryan Isaac:
Guests.

Matt Mulcock:
Sean and Sean, what’s his last name? He’s…

Ryan Isaac:
Omalay. I don’t remember.

Matt Mulcock:
He’s Jack. He’s, no, he’s Jack from Will and Grace.

Ryan Isaac:
Yeah. So funny.

Matt Mulcock:
Anyway, it’s amazing.

Ryan Isaac:
SmartLess. Okay. We’re in studio and it is currently Friday the 13th.

Matt Mulcock:
Spooky.

Ryan Isaac:
Which is… Do you feel weird? Are you superstitious?

Matt Mulcock:
I actually didn’t even know was that until you said it today. I didn’t even think about it. I’m not superstitious.

Ryan Isaac:
I am.

Matt Mulcock:
I don’t even think about that stuff, but I do. I’m a kind of a sucker for Lindsay Lohan.

Ryan Isaac:
What?

Matt Mulcock:
Who has a movie.

Ryan Isaac:
Oh, the movie. Okay.

Matt Mulcock:
With, I don’t know what her mom’s, what’s her?

Ryan Isaac:
Jamie Lee Curtis.

Matt Mulcock:
Jamie Lee Curtis.

Ryan Isaac:
That was so good. Freaky Friday.

Matt Mulcock:
Freaky Friday.

Ryan Isaac:
Yeah, and we watch that a lot.

Matt Mulcock:
I might go watch it tonight. Who knows?

Ryan Isaac:
That’s a good show. I’m weirdly superstitious. I got caught…

Matt Mulcock:
So are you nervous today?

Ryan Isaac:
I don’t know. Or I feel lucky. It’s just, I don’t know.

Matt Mulcock:
Well, with your flight coming in…

Ryan Isaac:
Dude.

Matt Mulcock:
That kind of makes it a little scarier.

Ryan Isaac:
Yeah. That was crazy. Shout out to a Legionnaire for living up to their a hundred dollars tickets.

Matt Mulcock:
There’s a whole other show we’re gonna do about that.

Ryan Isaac:
So I was just curious. I was like, what’s the history of Friday the 13th? Where does this scene come from? According to Wikipedia, which is also…

Matt Mulcock:
It’s true.

Ryan Isaac:
If you start a sentence like that.

Matt Mulcock:
It’s like study show.

Ryan Isaac:
It’s kind of interesting. There’s no like one tie back to it. But I kind of thought, one source goes back to the number 13 as a Norse myth. You know the Norseman? The god.

Matt Mulcock:
Oh yeah. The Norseman.

Ryan Isaac:
Yeah. The Norseman. There were 12 gods having a dinner party, and then there was a trickster, god, Loki. If anyone is watching season two of Loki.

Matt Mulcock:
That’s where this comes from?

Ryan Isaac:
Norse god. He… Yeah, he was the trickster god, Loki who was not invited, arrived as the 13th guest and then…

Matt Mulcock:
Freaking Loki wasn’t even invited to the party.

Ryan Isaac:
Yeah. And then he shot people with a missile toe tipped arrow. Someone died. Someone kissed…

Matt Mulcock:
Wait, missile toe like the kissing plant?

Ryan Isaac:
Yeah.

Matt Mulcock:
Oh.

Ryan Isaac:
In Christian tradition, the superstition comes from the story of Jesus Last Supper, where there were 13 individuals present. And then, the night before he died on Good Friday, the 19th century in France, 13, might’ve… Friday 13th was associated with misfortune as the first half of the 19th century. Like that was just a thing. It was just misfortune. So France…

Matt Mulcock:
They were just like 13. The numbers…

Ryan Isaac:
We don’t like this.

Matt Mulcock:
That number sucks.

Ryan Isaac:
Yeah.

Matt Mulcock:
Hotels don’t have the 13th floor, right?

Ryan Isaac:
Hotel. So there’s superstition around that. Here’s another… Because we like data. The reason why this ties into it’s Friday the 13th and we’re gonna be talking about something very scary today with a lot of details and facts. [laughter],

Matt Mulcock:
Are you reaching? [laughter]

Ryan Isaac:
Really scary. There… Okay. I thought this was cool though. The rate of accidents, there’s been two, there’s been some big studies on the rate of accidents. There was an older study in the ’90s that showed that, let’s see how they put it. The risk of hospital admission as a result of transport because of accident was increased as much as 52% on Friday the 13th.

Matt Mulcock:
What?

Ryan Isaac:
But then the data was like, well, we actually don’t have a big enough sample size to prove that. And then in 2008, there was another, a statistical study from an insurance company, big insurance company, that said there were actually fewer accidents, [laughter], and reports of fire and theft on the Friday the 13th.

Matt Mulcock:
No one knows.

Ryan Isaac:
And here’s the last piece of data, I thought…

Matt Mulcock:
Because no one goes out. Everyone is scared.

Ryan Isaac:
Everyone is freaked out today. The number of occurrences on the… I thought this was the coolest thing I thought. Okay. So each 400 year, calendar cycle, the Gregorian calendar cycle has 146,097 days. Exactly 20,871 weeks. The reason why that’s important is because the number of Fridays that fall on the 13th is the highest. Fridays have the highest number of 13s out of any other day of the week.

Matt Mulcock:
Oh!

Ryan Isaac:
Over like this entire huge cycle. So it’s gonna occur a little more frequently. And then there’s the myth and the history and the legend behind it. But I thought this data was kind of interesting. Basically, the data tells us nothing except that it happens a little more frequently.

Matt Mulcock:
Sounds like investing.

Ryan Isaac:
The French were scary. Loki was crazy. And… But I… Okay, if you ask my daughter about 13, she’ll tell you Taylor Swift was born on December 13th, and it’s Taylor Swift’s lucky number, and we should all feel lucky. And we’re living in the world of Taylor right now.

Matt Mulcock:
We are literally, it is her world we’re living in it. What I think is crazy about that, you break down all these different Christian myths or Norse gods and all this stuff. How all these types of myths kind of rhyme with each other. Meaning they all have kind of like…

Ryan Isaac:
They all have the same flavor.

Matt Mulcock:
Have the same flavor, but it comes from different parts of the world.

Ryan Isaac:
Thousands of years apart.

Matt Mulcock:
Yeah, it’s kinda wild.

Ryan Isaac:
And they just meld into each other.

Matt Mulcock:
Yeah, it’s interesting.

Ryan Isaac:
So are you scared? You’ll have to tell us. Go to the comments somewhere, wherever this is. Go to our Facebook group.

Matt Mulcock:
Wherever we post this.

Ryan Isaac:
We don’t even know what’s going on. The scary thing we’re going to be talking about today on Friday the 13th is called the Secure Act 2.0. [laughter]

Matt Mulcock:
This was definitely one of our biggest reaches.

Ryan Isaac:
The biggest reaches. Basically, we need to talk about this really important thing that’s going to change retirement plans and 401 [k] and some planning around your investment and savings and retirement plan strategy. And it happened to be on Friday the 13th, and so I found a totally unrelated story.

Matt Mulcock:
So it’s like let’s do this. I think in our intros from now on, we need to be like, if you want to get to the actual content, fast forward.

Ryan Isaac:
Minute five.

Matt Mulcock:
Yeah, minute five exactly.

Ryan Isaac:
Well, I’ll say that in the intro then. When I record the intro later. Anyway…

Matt Mulcock:
‘Cause I think some people like our little childish banter, and other people don’t.

Ryan Isaac:
It’s the internet.

Matt Mulcock:
And you know what? We’re okay with that. We’re okay with not being loved by everyone.

Ryan Isaac:
Well, it’s the internet.

Matt Mulcock:
Only most people.

Ryan Isaac:
Yeah. So lots of people hate it, lots of people love it. And I don’t really care. I’m having a great time.

Matt Mulcock:
Here we are, I’m enjoying myself.

Ryan Isaac:
Eight years later, every Wednesday, and I’m still having a good time. And I think it helps some people, so we’ll keep going. The Secure Act 2.0. Matt, what is the introduction to the Secure Act 2.0? Where does this come from? Why is this happening to us? Why?

Matt Mulcock:
Why is this a scary thing? I don’t know if it’s scary, but we’re gonna go with that. Okay. So let’s start with what is the Secure Act. It was the original… So here, the government loves their acronyms, so this is a good one. Here’s what it means. The Setting Every Community Up for Retirement Enhancement Act is what SECURE stands for.

Ryan Isaac:
What, they do these crazy… Okay.

Matt Mulcock:
They do. The SAVE plan.

Ryan Isaac:
The SAVE.

Matt Mulcock:
And like REPAYE and PAYE.

Ryan Isaac:
Setting Every Community Up for Retirement Enhancement Act.

Matt Mulcock:
Yes. So it was originally signed by President Trump in 2019. So the whole purpose of the original act, and then since, the 2.0 that we’ll spend the most time talking about today. The purpose of this act originally was to improve the retirement prospects of American workers by making it easier for employers to set up retirement plans…

Ryan Isaac:
Offer plans.

Matt Mulcock:
And offer plans.

Ryan Isaac:
First, I’m just curious. Too long, didn’t read. What is that TLDR?

Matt Mulcock:
TLDR, yeah.

Ryan Isaac:
Did it? Did it improve the retirement prospects of many Americans after you’ve read through these things? You’re like, I think it’s going to…

Matt Mulcock:
I don’t think so. Well, I think it’s probably too early to say. With any government legislation, I think it’s… The original act was 2019, then the 2.0 act was signed in 2022 last year, and there’s still things rolling out. It’s like anything, there’s different parts of these laws and acts.

Ryan Isaac:
Yeah, it’s [0:09:41.3] ____.

Matt Mulcock:
And then some get litigated, some get pushed back on, some get delayed. We’ll hit a couple of these things that got pushed back. So I think it’s really, really hard to tell, but the congressional intent behind this was to enhance the ability to for Americans to set up their selves for retirement, and there’s a reason why, right? So let’s go over some numbers of the problem.

Ryan Isaac:
Let’s start.

Matt Mulcock:
So we’ve hit this kind of data before, but let’s talk about just the average, and then the… We’ll hit both, ’cause for all you math nerds out there, Ryan, giving you a shout out.

Ryan Isaac:
It’s me.

Matt Mulcock:
There’s a difference between the average and the median, right?

Ryan Isaac:
And the mean.

Matt Mulcock:
The mean, median, they’re different things. So if we talk about the average…

Ryan Isaac:
Don’t quiz me in public, please.

Matt Mulcock:
Yeah, I won’t. I won’t put you on the spot. But if we talk about the average or known as the mean in math, the average retirement saving balance is by age, by age group.

Ryan Isaac:
That’s interesting.

Matt Mulcock:
So under 35, we’ll just… I hope this is helpful or just kind of interesting.

Ryan Isaac:
No, no, no. This is good data, because it supports what this act is trying to do.

Matt Mulcock:
Yes.

Ryan Isaac:
Which is help people who are not saving enough for retirement, and it’s trying to provide the data to say, like, we’ve got an issue here, people. So I think this is helpful to recap always.

Matt Mulcock:
Yeah. And I also… I actually like reading these studies, and kind of getting a kind of a… ‘Cause I think it’s really easy for us as individuals to get really feeling like you’re… You kind of get siloed off or you feel siloed off into your local community or people you surround yourself with, and it kind of… I think it’s nice sometimes to take a step back and say…

Ryan Isaac:
Oh, yeah, yeah.

Matt Mulcock:
Where do I stack up if we’re talking kind of at the macro level, right? So average retirement savings per age group. So under 35, just over $30,000 is the average.

Ryan Isaac:
Average savings balance.

Matt Mulcock:
Savings for retirement.

Ryan Isaac:
So if you’re under 35, the average is 30 grand.

Matt Mulcock:
Yeah.

Ryan Isaac:
Which is why you said the average and the median, ’cause this is going to be interesting.

Matt Mulcock:
We’re gonna hit the median here in a second. So 35 to 44 is just under $132,000 saved for retirement. 45 to 54, $254,000 and change.

Ryan Isaac:
And real fast, I’m just curious. This data probably comes from Department of Labor data?

Matt Mulcock:
Yeah. I think this came from the Fed, I want to say.

Ryan Isaac:
Okay. So this probably is only actual federally regulated retirement plans.

Matt Mulcock:
Yes.

Ryan Isaac:
Would it include like, personal IRAs, not brokerage accounts?

Matt Mulcock:
I’m gonna guess, I’m going to guess, and I need to probably dig in and find those details. But I’m gonna guess they’re talking specifically, like, retirement-designated plans, probably IRAs, 401 [K] s, 403 [b] s, like, designated retirement savings.

Ryan Isaac:
Yeah. Probably. Okay.

Matt Mulcock:
Yeah, that is…

Ryan Isaac:
I’m just curious, like, if this could be a little bit different if they had more data. But anyway, it’s not.

Matt Mulcock:
For sure.

Ryan Isaac:
Yeah, but this is really helpful because, most average Americans, if they have retirement savings in the form of stocks and bonds and investments, it’s usually in a retirement plan.

Matt Mulcock:
In a retirement account. It’s not gonna be… Most, yeah. I would agree.

Ryan Isaac:
Usually not in a brokerage account.

Matt Mulcock:
No. No.

Ryan Isaac:
Which is interesting.

Matt Mulcock:
So 45 to 54, just over $250,000. Excuse me. 55 to 64 is over $408,000. And then 65 to 74 is just over $426,000.

Ryan Isaac:
It’s crazy to see that jump, the 55 to 64. The average is $408,000, and then 65 to 74, it’s only $426,000.

Matt Mulcock:
Yeah. It’s like barely…

Ryan Isaac:
Probably ’cause there’s no more savings after that.

Matt Mulcock:
Yeah. I would imagine.

Ryan Isaac:
That makes sense.

Matt Mulcock:
So you might see this and say, all right, so let’s say the average 65-year-old, you’re sitting on over $400,000.

Ryan Isaac:
Yeah. Like, dude, if we…

Matt Mulcock:
I was just gonna do what you’re gonna do.

Ryan Isaac:
Okay. Do it. Do it. Yeah.

Matt Mulcock:
Okay. So if we do kind of your, let’s do Stu Golf, the 4% rule, right?

Ryan Isaac:
Yeah, 4%.

Matt Mulcock:
You’re talking like 16 grand, a year.

Ryan Isaac:
Yeah, a year.

Matt Mulcock:
That you’re gonna be…

Ryan Isaac:
In perpetual income.

Matt Mulcock:
Yes.

Ryan Isaac:
Or you could take out a 100 grand for four years.

Matt Mulcock:
Yeah, exactly. So…

Ryan Isaac:
Like, that’s just not enough money.

Matt Mulcock:
Just not enough.

Ryan Isaac:
Which the, yeah. There’s a whole other subject, social security or other assets coming into that, but yeah.

Matt Mulcock:
Exactly. So, then we’ll do the same thing, ’cause you might… So still, you might hear that and say, all right, average 65-year-old has over 400 grand. That’s not bad. It’s not bad. It’s a lot of money. But as we know, again, when it comes to math, averages, skew, like the big, big numbers at the top or the bottom will skew.

Ryan Isaac:
They make the average.

Matt Mulcock:
In this case, and we’ll prove this out by going over the median. The median is being that central number.

Ryan Isaac:
The actual the…

Matt Mulcock:
The actual middle point.

Ryan Isaac:
The geographical middle point.

Matt Mulcock:
Middle point.

Ryan Isaac:
Yeah. I used to mess up mean median and average in all of my math classes.

Matt Mulcock:
Me too. Yeah, me too.

Ryan Isaac:
Yeah. Just probably why I didn’t become a mechanical engineer, [laughter] like I was studying.

Matt Mulcock:
There was other reasons I didn’t become a mechanical engineer. [laughter] Okay. So same thing for median to the midpoint.

Ryan Isaac:
Okay.

Matt Mulcock:
Under 35, 13 grand.

Ryan Isaac:
It was 30.

Matt Mulcock:
It was 30.

Ryan Isaac:
On the average.

Matt Mulcock:
Median is 13. For 35 to 44, it was $132,000, the median is $60,000, 45 to 54 refresher. The average was over $250,000. The median is a $100,000.

Ryan Isaac:
A 100 grand.

Matt Mulcock:
55 to 64, just a reminder, the average was over $408,000. In this case it’s $134,000 for the median.

Ryan Isaac:
Geez.

Matt Mulcock:
And then 65 to 74, the average was $426,000 and change, the median is $164,000 for retirement as the midpoint.

Ryan Isaac:
Yeah, it’s crazy. So the difference between the average and the median up until that like mid 50s point was about 50%, you know?

Matt Mulcock:
Yeah, yeah.

Ryan Isaac:
The median is like half of what the average was until you get into the later and then it’s like 25%.

Matt Mulcock:
Yeah, yeah.

Ryan Isaac:
Which is like…

Matt Mulcock:
Wild. Which again, shows that the bigger numbers at the top are skewing up or skewing that average up.

Ryan Isaac:
Yeah, skewing in very average. Especially in that older 55 plus group, the higher retirement balance numbers are really skewing it.

Matt Mulcock:
Exactly.

Ryan Isaac:
A lot more than the younger ones. Man.

Matt Mulcock:
This is what the government is looking at, as they think about these acts. And so, the problem being that there’s just not enough people with enough savings to… And it’s putting stress on the system. And that’s what…

Ryan Isaac:
Yeah, stress on the system.

Matt Mulcock:
The government has an incentive to say, we got to figure this out for younger people and fix this. So this is what’s wild. We’ve seen tons of studies on this, so NerdWallet, nerdwallet.com, that’s a fantastic financial publication group. They’re huge now. They did a study, but this wasn’t like government funded anything like that. But 2023 study, this is wild, Ryan. They found that 60% of Americans don’t even have a retirement specific account. I’m like, how is that even possible?

Ryan Isaac:
60% of people.

Matt Mulcock:
60%.

Ryan Isaac:
And you would hope that that means that that 60% has businesses or real estate, but that’s probably not true.

Matt Mulcock:
I don’t.

Ryan Isaac:
That’s like totally not true. Yeah.

Matt Mulcock:
I think we get… I think because of the demographic of people we work with…

Ryan Isaac:
We’re very skewed in a way that we see things.

Matt Mulcock:
We’re very, very biased and skewed. So again, this is the problem. And there’s a…

Ryan Isaac:
Whoa, life expect… Oh geez.

Matt Mulcock:
Yeah, so I wanted to bring this up because this idea of retirement, we were just talking before we came on with some of the people upstairs on our team. Shout out Robbie and Powell. Just we get into these conversations all the time ’cause we’re nerds.

Ryan Isaac:
RNP. That’s… RNP.

Matt Mulcock:
Yeah, RNP. So not RIP.

Ryan Isaac:
Not RIP.

Matt Mulcock:
RNP.

Ryan Isaac:
Yeah. If they ever leave us, then it’ll be RIP, RIP.

Matt Mulcock:
Yes, exactly. But we were talking about this idea of like ’cause Powell said, he’s a young pup. Powell’s, shout out Powell. He’s amazing.

Ryan Isaac:
We’re old enough to say that to call people young pups?

Matt Mulcock:
We’re old enough to say that. Yes. Yes.

Ryan Isaac:
I can, for sure.

Matt Mulcock:
We both can.

Ryan Isaac:
I think you can, you have some gray in the beard.

Matt Mulcock:
I have gray in the beard, I’m going, I’m gonna be 37 in a couple weeks.

Ryan Isaac:
Do you just mentally feel old?

Matt Mulcock:
Yes, I do. [laughter]

Ryan Isaac:
2023 has been an aging year. I don’t know if anyone else feels like that. I feel like I’ve aged like 15 years.

Matt Mulcock:
Yeah. I definitely have.

Ryan Isaac:
Carry on. And my life expectancy has probably gone down.

Matt Mulcock:
Honestly, it has.

Ryan Isaac:
I think it has.

Matt Mulcock:
Like generally speaking.

Ryan Isaac:
Oh, like statistically?

Matt Mulcock:
Statistically speaking, we are actually in a declining age life expectancy in America.

Ryan Isaac:
Oh, you start feeling what’s going on?

Matt Mulcock:
Yes.

Ryan Isaac:
My body is mirroring the statistics great. Good enough.

Matt Mulcock:
My back is at least. Okay, so we were talking about this idea of like retirement and Powell made a comment that retirement is gonna look vastly different in the next 30, 40, 50 years. Which I agree with. We’re not gonna go there. But it got into this conversation around the idea of retirement as we know it today is actually a relatively new concept. So I wanna break this down a little bit when it comes to, I think the key factor here is being life expectancy in America. And here’s what I mean. Life expectancy in America, in 1950 men was 66.

Ryan Isaac:
That’s so shockingly low. It feels like cave people had those life expectancies. Not us in the 1950s.

Matt Mulcock:
I know, wild. Women was 72. Now, that’s different, when we talk about life expectancy versus like the probability of living to a certain age, they’re very different things.

Ryan Isaac:
Yeah, mortality tables.

Matt Mulcock:
Yeah, exactly.

Ryan Isaac:
Right, okay.

Matt Mulcock:
But just life expectancy as they calculated in 1950 was 66, women 72. So, if you think about it, in 1950, social Security Act had already been signed and for several, a couple of decades. But the earliest you could take social security was 65. So if you think about… And that’s the designated age of retirement, was 65.

Ryan Isaac:
So random too.

Matt Mulcock:
Very random. I’m sure they had reasons behind it.

Ryan Isaac:
Yeah. Well, I mean, just random that we’ve anchored to that societally, like…

Matt Mulcock:
Is it… That’s the retirement age.

Ryan Isaac:
Yeah. When I’m 65, I’ll be done.

Matt Mulcock:
But let’s even say you retired early at 60. Life expectancy for a man at that point was 66, women 72. So the need, and even the cultural mindset around, you’re going to have a life in retirement, was not really there.

Ryan Isaac:
No, yeah, you’re right.

Matt Mulcock:
It’s a post World War II phenomenon. And again, social security I think played into this. And then over the decades when we have life expectancy from 1950 to today, again, it’s going to first time I think ever, we’ve actually had a decrease in life expectancy the last couple of years. But life expectancy today, men, 74 women, 79.

Ryan Isaac:
All the women always outliving men.

Matt Mulcock:
Always outliving the men.

Ryan Isaac:
Makes total sense to me. That’s a big jump though.

Matt Mulcock:
Yeah. So again, if we just think about…

Ryan Isaac:
And that’s expectancy.

Matt Mulcock:
Expectancy.

Ryan Isaac:
Yeah. That’s…

Matt Mulcock:
Not even probability.

Ryan Isaac:
Yeah, probability and what’s…

Matt Mulcock:
We probably should have pulled that data.

Ryan Isaac:
Yeah, that’s okay.

Matt Mulcock:
But the whole point here is again, this culture around retirement. And this idea around retirement is relatively new, right?

Ryan Isaac:
Yeah.

Matt Mulcock:
So, again, which is why I think we’re having these… So partly why we’re having some of these issues of people not really thinking about it, ’cause again, it’s a relatively new concept.

Ryan Isaac:
It’s new.

Matt Mulcock:
But the problem being we’re living longer and retiring still around the same age or even earlier.

Ryan Isaac:
Yeah or even earlier. And you see this too from our clients, and you even feel this way, but just the perception of what work, a career even means anymore is totally different.

Matt Mulcock:
Yeah.

Ryan Isaac:
I’m just stereotyping ’cause I wasn’t alive then, okay, I didn’t live this experience, but I’m thinking back to the culture of what you see and hear from people in the 1950s around just work and career, was very much long, long work weeks. One company, 50 years in a pension, right?

Matt Mulcock:
Yeah.

Ryan Isaac:
And you’ll play… You’ll live later. Right now, mom and dad, they just grind all week, get the pension and then golden years.

Matt Mulcock:
Yep.

Ryan Isaac:
But these days, people just don’t… Even people who are approaching retirement soon, let’s say in the next 10 to even… 10 to 15 years, view it pretty differently.

Matt Mulcock:
Oh, very different.

Ryan Isaac:
They’re transitioning work differently. They’re holding onto work longer for various reasons. They’re trying to live life experiences sooner than later. And then even younger generations, so we’re talking younger millennials and Gen Z, people just talk about work and career so different…

Matt Mulcock:
Very different.

Ryan Isaac:
Than ever, so to your point, that it’s like we’re just in a pretty new phase of what retirement even means. Yeah. That’s… It’s so true. And it’s constantly changing, but it’s very radical from what our parent’s generation and their parents’ generation were doing.

Matt Mulcock:
But even think about this older school mindset, we’ll call it, of you work to, you grind for 40 years in a career, and then at 60, 65, you ride off into the sunset. Even that, if you’re talking back in the day, that those sunset years were not expected to be very long.

Ryan Isaac:
Very long, yeah.

Matt Mulcock:
Yeah. So it wasn’t the pressure for you to save…

Ryan Isaac:
To have that much money.

Matt Mulcock:
Yeah.

Ryan Isaac:
Or even save…

Matt Mulcock:
Pensions were a thing.

Ryan Isaac:
Pensions and social security were happening.

Matt Mulcock:
Yeah.

Ryan Isaac:
Pensions with so many companies.

Matt Mulcock:
At that point, it was pension, social security, I think for a lot of people at that point. And because you weren’t expected to live as long. The other part of this too could be a whole other show. The expectations of what we want out of life.

Ryan Isaac:
Of what living means. See, I remember, again, I didn’t live this, but I’m just going off of memories. I remember my grandparents, who I have one left and he’s in his late 80s now, but I remember when he and my grandma retired 20 years ago, and they took one Hawaiian vacation in their golden years.

Matt Mulcock:
Probably their whole retirement time.

Ryan Isaac:
And then one Alaskan cruise. And those were, now…

Matt Mulcock:
Huge.

Ryan Isaac:
20 year olds just do this weekly.

Matt Mulcock:
Yeah.

Ryan Isaac:
But I mean, good for them. But to your point…

Matt Mulcock:
The expectations.

Ryan Isaac:
The expectations are totally different. And cost of living. I don’t… We don’t have the statistics of the comparison of what average pension, social security payouts and wages were compared to cost of living, but our grandparents were buying $19,000 houses on an acre.

Matt Mulcock:
Yeah. Well, but think about this. In 1955, I want to say, I just heard this on a podcast, in 1955 or in that range, the average square footage for a home in America was like 900 square feet.

Ryan Isaac:
Yeah. Small, everything… Expectations were totally different.

Matt Mulcock:
Everything was smaller. Every expectations were lower.

Ryan Isaac:
They’re through the roof now.

Matt Mulcock:
If you take it today, I think it’s something in the range of just under 3000 square feet, right?

Ryan Isaac:
Yeah. And if you just say, what does it mean to live a rich life? I just close my eyes and I think of an Instagram reel of just gorgeous, happy people doing exotic things all over the world constantly, the expectations, they’re way higher.

Matt Mulcock:
Wildly higher.

Ryan Isaac:
Wildly different.

Matt Mulcock:
Yeah. Again, that could be a whole other show too.

Ryan Isaac:
Totally.

Matt Mulcock:
But again, I just think all of these components have changed the landscape.

Ryan Isaac:
Interesting. They are. They have.

Matt Mulcock:
And put more pressure on the individual.

Ryan Isaac:
To save for all this.

Matt Mulcock:
To save…

Ryan Isaac:
And keep up with it later.

Matt Mulcock:
Keep up with it, right? So I think all of these components, all these factors have led to the government saying, all right, we’re not saving enough. It’s putting pressure on the system. We need to step up and do something and force almost, or incentivize businesses to start offering this stuff to employees to help push them to save more.

Ryan Isaac:
Which is where this comes from.

Matt Mulcock:
Which is… All that preamble.

Ryan Isaac:
23 minutes later, here we are.

Matt Mulcock:
All that preamble to give you the details.

Ryan Isaac:
Hey, those were scary statistics though.

Matt Mulcock:
They were. Oh, there it is…

Ryan Isaac:
That was scary. See what I’m talking about? We knew.

Matt Mulcock:
We knew. You knew. You knew.

Ryan Isaac:
I wasn’t just desperately looking for an intro that seemed similar or entertaining.

Matt Mulcock:
You always have a master plan behind this. Okay. So Secure Act 2.0. Let’s hit the details, the dirty details of what this all means in the… So starting out for this year, 2024, 2025 and beyond, some of the highlights, we’ll say, highlights or details, those are two different things.

Ryan Isaac:
Yeah. I think some of these are going to be details.

Matt Mulcock:
So, they can’t be highlight and details. It’s the details.

Ryan Isaac:
Details. It’s mostly details. Yeah.

Matt Mulcock:
Let’s do that. All right. 2023, this year…

Ryan Isaac:
This year.

Matt Mulcock:
Coming to an end. The RMD age. So just really quick, required minimum distribution. Retirement accounts. Any pre-tax retirement account has… Once you hit a certain age, the government says you got to start taking some money out. That’s what the RMD is. RMD age increased from 72 to 73 for this year. If you remember in 2019, the original act actually had pushed the age from 70 and a half up to 72 and there’s a whole…

Ryan Isaac:
That wasn’t technically 72 and a half right now, it was actually…

Matt Mulcock:
No, it was 70 and a half.

Ryan Isaac:
And now it’s 72 even.

Matt Mulcock:
And then it’s 72 even…

Ryan Isaac:
They got rid of halves.

Matt Mulcock:
And then they went to 73.

Ryan Isaac:
I’m proud of them for doing round numbers.

Matt Mulcock:
I know. It’s like 59 and a half. 70 and a half. It’s like, what are we talking, four year olds here, sir?

Ryan Isaac:
This is the government then why it does this stuff?

Matt Mulcock:
The only thing that… The only people that should be talking about halves with ages are parents with young children. It’s like how old is he? Two and a half.

Ryan Isaac:
Two and a half. Whoa.

Matt Mulcock:
Weird.

Ryan Isaac:
Actually, yeah.

Matt Mulcock:
Simple and SEP… Are retirement plans depending on a situation that you might have is like, let me say…

Ryan Isaac:
Give me Roth.

Matt Mulcock:
Yeah, they can now be Roth contributions starting this year.

Ryan Isaac:
So, let’s think about this in a dentist’s life. Who has a SEP? Most SEPs are only appropriate if you don’t have employees who qualify, which is either you are a 1099 associate with your own little LLC or S-corp. That sounded like defaming. Like your own little, your own S-corp or LLC.

Matt Mulcock:
Yeah. Just you’re saying, just…

Ryan Isaac:
That’s all you’ve got. [laughter]

Matt Mulcock:
Oh, it’s freaking Piker.

Ryan Isaac:
Didn’t mean that. So it’s going to be that, or you have a newer business where you employees don’t meet the qualification threshold of being there for three years or more, which is what it takes in a SEP. But that’s cool to think, what’s the SEP limit this year? 64, 65?

Matt Mulcock:
Well, yeah, it goes up to 66, but the contribution is based off of your income.

Ryan Isaac:
Your income. Yeah, 25% [0:27:20.3] ____.

Matt Mulcock:
So it’s 25% of your income or 66,000.

Ryan Isaac:
But I mean, if someone could max out 66 grand. I’ve had clients do that all the time in a SEP where you have no employees and you can do all Roth. Although the caveat to this is, if you’re making enough money to max out a SEP at 66,000 a year or 25% of your income, your income’s probably high enough to want the tax deductions of non-Roth. Probably. That’s a whole other thing.

Matt Mulcock:
Yeah. I was going to say, that means your income is over $260,000.

Ryan Isaac:
Yeah, but the simple…

Matt Mulcock:
Simple, well, I was going to say really quick. A solo 401 [k] for most of those types of individuals usually will make more…

Ryan Isaac:
A little more sense. A little bit easier and simpler to get those done, to max them out.

Matt Mulcock:
To get more money in that. Yeah.

Ryan Isaac:
Yeah. Get them maxed out. But the Roth option is cool for those who are maybe just trying to play that tax game or just like, I don’t care. I’d rather just pay the taxes now, maybe their tax bracket makes sense to do that, but some people also just like, I don’t care. I just want to have Roth money. So I’m just going to do it. Which is like, fine, okay, do it.

Matt Mulcock:
Which is fine. There’s a whole other discussion around that as… On an individual basis of does it make more sense to do a pre-tax versus Roth? But for a simple, for your staff. If you have staff, it’s actually pretty cool for your…

Ryan Isaac:
Yeah, no, you’re right. Actually thinking about the team…

Matt Mulcock:
For your lower, lower income, lower than you income people.

Ryan Isaac:
A lot of team could benefit from that Roth contribution. It makes sense mathematically in their tax bracket for a lot of team members. So that’s cool.

Matt Mulcock:
So if you have a Simple, solo so 401 [k] s for a long time have already offered Roth. So if you have a 401 [K] at the office, this isn’t a big deal for you. But if you have a Simple, your staff can now start doing Roth.

Ryan Isaac:
Cool.

Matt Mulcock:
Another thing for 2023, the RMD penalty, so we’ll hit what this means, was reduced from 50%-25%.

Ryan Isaac:
I always thought that was crazy.

Matt Mulcock:
It was 50%. It’s wild.

Ryan Isaac:
Yeah. It’s insane.

Matt Mulcock:
Yeah. So what this really means is if you miss your RMD, so again, the year you were supposed to take it, let’s say it was $10,000 that you had to take out just for easy math for me, I’m not a mechanical engineer.

Ryan Isaac:
I’m not either.

Matt Mulcock:
If you had a $10,000…

Ryan Isaac:
I dropped out.

Matt Mulcock:
You dropped out, drop out. I never even started [laughter] so if you had a $10,000 required minimum distribution this year, let’s say, and you missed it, the penalty used to be 50% of that balance.

Ryan Isaac:
That’s crazy.

Matt Mulcock:
So you had to take out the 10 grand plus pay five in penalties. They’ve reduced that to 25%.

Ryan Isaac:
Still is very egregious.

Matt Mulcock:
Still ridiculous.

Ryan Isaac:
Don’t miss your RMDs.

Matt Mulcock:
They’ve also become a little bit more lenient, especially during COVID. We had a few cases of clients who came on board, had already missed some and we had to help them through it. And the government has become more lenient. As long as you’re getting the money out, you can usually get that waved. But still, if it happened a lot, you would be paralyzed.

Ryan Isaac:
And for anyone’s maybe worried about that, it’s… RMDs are pretty automatic out of most major banking custodial institutions. I mean, what used to be TDs, now Schwab Fidelity, I mean, I’ll, it’s a pretty automatic process of notifications and…

Matt Mulcock:
They give you the numbers.

Ryan Isaac:
Yes.

Matt Mulcock:
Right. All that.

Ryan Isaac:
Yeah. They’re calculating it. They’re telling…

Matt Mulcock:
Yeah. Yep. So, okay. Tax credits for establishing retirement plan increased from 50% of the cost of setting up the plan to a 100%.

Ryan Isaac:
So this is part of their initiative, which is you need to make it easier for people to have something.

Matt Mulcock:
And they’re ramping this up. So they’re… And we’ll hit this, but they’re going from incentivizing you with tax credits to set up a plan to then requiring it coming up. We’ll talk about this.

Ryan Isaac:
Yeah. Okay. So this year, 2023 we’re still in the 2023.

Matt Mulcock:
2023.

Ryan Isaac:
Tax credits just went up to a 100% for establishing a retirement plan.

Matt Mulcock:
Exactly.

Ryan Isaac:
Which at the time of this recording, October, oh, of course the 13th…

Matt Mulcock:
Yeah, Friday the 13th.

Ryan Isaac:
It’s now too late to set up a 401 [k] for this year.

Matt Mulcock:
If you’re doing a safe harbor plan, which most of our clients, most dentists out there are doing a safe harbor.

Ryan Isaac:
So a non-safe harbor, a solo 401 [k]?

Matt Mulcock:
Solo 401 [k] can still be set up. Yep. Solo can still be set up.

Ryan Isaac:
A Simple SEP?

Matt Mulcock:
A traditional 401 [k] simple can still be set up. A SEP easily. A SEP is the most flexible.

Ryan Isaac:
Yeah. Because you’ll be funded the next year.

Matt Mulcock:
So if you’re a 1099 employee… If you’re a 1099 sole proprietor, you can set up a SEP IRA up until tax filing deadline of next year.

Ryan Isaac:
Yeah. Easy.

Matt Mulcock:
And fund it for the year prior. So they’re pretty straightforward and they’re pretty flexible. And the last thing for 2023 was catchup contributions. So this is, if you’re 50 or older, you can do an additional contribution. It went from 6,500 to 7,500.

Ryan Isaac:
Yeah. Those are cool.

Matt Mulcock:
So if you’ve…

Ryan Isaac:
I mean, it’s such a big difference, like right now, the 401 [k] limit is 22,500 that you can put away as an employee. If you’re over 50, an extra 7,500 bucks on that.

Matt Mulcock:
Yeah. She’s talking $30,000.

Ryan Isaac:
$30,000, which is right now pre-tax with that catch up. That’s going to change. But that’s a lot of money pre-tax. If you and your spouse are both on a 401 [k] right now, over 50, we’re talking $60,000 of pre-tax. I mean, this is why, the phrase, tax strategy, tax planning, how do you be aggressive with taxes? That phrase gets thrown around a lot with marketing a little too much. But it’s like, that’s a pretty big strategy right there. We’re talking huge amounts of money pre-tax.

Matt Mulcock:
So let’s just put some numbers to this. Let’s say you’re a high… You’re in the highest tax bracket. Because this is something that gets confused a lot. When you’re making a contribution, when you’re taking a deduction, let’s say for a 401 [k], you are taking that deduction at your high, because we live in a progressive tax system, you are… Any dollar above and beyond that next marginal rate, your tax savings is at that marginal rate.

Ryan Isaac:
Yep.

Matt Mulcock:
So let’s say you are… A lot of our dentists are at this highest marginal rate, but let’s… Actually, let’s say you’re not even there.

Ryan Isaac:
Okay.

Matt Mulcock:
You’re not even at the highest, but let’s say you’re at the 35% range.

Ryan Isaac:
You’re almost the highest.

Matt Mulcock:
You’re close.

Ryan Isaac:
Yeah.

Matt Mulcock:
So you’re saying, you’re each putting in $30,000. Let’s say it’s at the 35% marginal rate. So that’s what your tax savings would be, at that 35%. So that is $21,000 that you’re saving in taxes that you wouldn’t have to pay. That’s just federal.

Ryan Isaac:
That’s just federal.

Matt Mulcock:
If you’re in a high income state…

Ryan Isaac:
State.

Matt Mulcock:
Like California, man, you’re talking probably 40, 50% tax savings.

Ryan Isaac:
So you’re saying every five years, that’s $100,000 tax savings.

Matt Mulcock:
Tax savings.

Ryan Isaac:
Not deduction, savings.

Matt Mulcock:
Yeah. That you’re… Taxes you don’t have to pay.

Ryan Isaac:
Every five years. Every five years.

Matt Mulcock:
Yep.

Ryan Isaac:
So yeah, it’s a boring unsexy answer to be like, the biggest proactive year over year consistent thing you can do for tax strategy as a earned income dentist is the… Is a big retirement plan and maxing it out.

Matt Mulcock:
And then let’s say, this is a side note, but I think a hopefully helpful side note, you go to retire down there, ’cause someone might say, well, my tax bracket’s not changing. I’m going to keep making all this money.

Ryan Isaac:
Yeah.

Matt Mulcock:
I still spend all this money and… No, the probability of you making this kind of money in retirement, it’s actually quite low.

Ryan Isaac:
Yeah.

Matt Mulcock:
Your highest income earning years are going to be somewhere in that 45, 50 age range up until you retire.

Ryan Isaac:
Yes.

Matt Mulcock:
Then let’s say you retire, let’s say you sell your practice. You come into all this money, you pay your taxes, and then you’re just, maybe let’s say you’re chilling for a couple years and you’re showing very little of any income in your earliest years of retirement.

Ryan Isaac:
Yeah.

Matt Mulcock:
‘Cause you most likely won’t be showing much income, then guess what you can start doing? Roth conversions. You start taking that pre-tax money, converting it over to a Roth at lower tax rates.

Ryan Isaac:
Yes.

Matt Mulcock:
And you’re now starting to fill up that Roth money. The 35% or 37% tax savings you got for that deduction, you’re now converting it, let’s say at a 12 or 15% tax rate. We call that people what? Say it with me now. Tax arbitrage.

Ryan Isaac:
Yes, that’s fancy.

Matt Mulcock:
It is fancy. I love saying that. But again, I’m just saying this doesn’t apply to everyone.

Ryan Isaac:
Yeah.

Matt Mulcock:
But these types, whenever I hear someone say, why would you ever do pre-tax?

Ryan Isaac:
Sure.

Matt Mulcock:
This is why. You can save legitimate tax dollars, significant tax dollars in your highest income earning years, and then convert it later at much lower tax rates. And then take it out years and years after that. Tax free.

Ryan Isaac:
Tax free. Yeah. And the way that most dentists are accumulating wealth, by the time they retire, a lot of… Like our clients, a lot of them already have a lot of after tax assets. So it’s like capital gains in the future. And then they have practice sales. Big liquidity events, which just translate into after-tax money. And so it’s like, to be in the highest bracket income right now, married filling jointly is what? You got to be like five something?

Matt Mulcock:
It’s 600.

Ryan Isaac:
Okay. 600 plus?

Matt Mulcock:
Yep.

Ryan Isaac:
So in order to have the same tax bracket later, you would have to be spending 600 out of pre-tax accounts, where you still have to be taxed at earned income rates.

Matt Mulcock:
I’m so glad you brought this up, ’cause with this point…

Ryan Isaac:
It’s like, you’re not spending 600 likely if you’ve been making 600.

Matt Mulcock:
Exactly. We have to, let’s for a second drill this home, because I’ve talked to CPAs that say this to me, where they’ll say, well, why would you do pre-tax? Their lifestyle, “lifestyle” will be the same. So to your point, let’s say your lifestyle is you’re spending 200 grand a year, but you’re making 600.

Ryan Isaac:
Yeah. Or 250 or 300 but you’re making 700 or 800.

Matt Mulcock:
But you’re making 700 or 800.

Ryan Isaac:
Exactly. Yeah.

Matt Mulcock:
Whatever it is. Your tax bracket is not based on your lifestyle. It’s based on your income. So I would tell anyone, to your point, are you going to be making $700,000 on paper in retirement?

Ryan Isaac:
Yeah. Or pulling that out of your accounts and having these tax on it?

Matt Mulcock:
The answer is no.

Ryan Isaac:
No, you’re not.

Matt Mulcock:
You’re not.

Ryan Isaac:
Yeah.

Matt Mulcock:
You’ll be pulling out, let’s say, let’s say all of your money was in a 401 [k] then, all pre-tax.

Ryan Isaac:
All has to be pre-tax. Yeah. It has to be pre-tax. Yeah.

Matt Mulcock:
All pre-tax. Let’s say you’ve got $5 million sitting in a 401 [k].

Ryan Isaac:
But you’re pulling out 200 grand a year.

Matt Mulcock:
You’re pulling out 200 grand a year.

Ryan Isaac:
250…

Matt Mulcock:
Yeah. Guess what? You are in much lower tax bracket.

Ryan Isaac:
Yeah. You’re not in your $700,000 or $800,000 tax bracket.

Matt Mulcock:
Not only that, chances are you’re not gonna have it all in pre-tax.

Ryan Isaac:
It’s not there.

Matt Mulcock:
No. You’re gonna have a punch of money and in after-tax money.

Ryan Isaac:
It’s in after-tax money.

Matt Mulcock:
And so…

Ryan Isaac:
Capital gain rates.

Matt Mulcock:
You might only show $100,000 in taxable income in that year.

Ryan Isaac:
Exactly.

Matt Mulcock:
Or less.

Ryan Isaac:
It’s not the same. The caveats that you have to have such a high net worth and the net worth has to be kicking off active income into the, 5, 6, 700 plus thousand dollars income range a year that you can’t even help. You’re… It is just kicking off those incomes, which some people will get there. Then your tax bracket is still gonna be high in retirement. Yes.

Matt Mulcock:
And then if you’re at that point…

Ryan Isaac:
But that’s okay.

Matt Mulcock:
I’m gonna say…

Ryan Isaac:
That’s okay

Matt Mulcock:
You won the game, who freaking cares?

Ryan Isaac:
If you’re done working and it’s passively kicking off 800,000 a year, it’s like…

Matt Mulcock:
If You’re passively kicking off 500 plus thousand dollars in the coming year…

Ryan Isaac:
I hope you’re enjoying something besides worrying about this.

Matt Mulcock:
Then go enjoy your life.

Ryan Isaac:
All right. What we’re at a minute 37.

Matt Mulcock:
Okay. Let’s kick it. Let’s roll, 2024…

Ryan Isaac:
I like that tangent though. That’s a very important tangent.

Matt Mulcock:
I thought I hopefully was helpful for the people. Sometimes our tangents are helpful. Okay.

Ryan Isaac:
To us.

Matt Mulcock:
2024 coming up, which is crazy that it’s coming up in a couple months. So $1000 emergency withdrawal is allowed from retirement accounts.

Ryan Isaac:
How do you feel about that?

Matt Mulcock:
I don’t like it.

Ryan Isaac:
I don’t like it either.

Matt Mulcock:
I don’t Like it, Bob.

Ryan Isaac:
I don’t like it. Why don’t you like it?

Matt Mulcock:
I just don’t like the… I understand the intent behind it and I understand this probably comes from these studies that have come out recently become really popular about how the average American can’t pay for $1000 emergency without going into debt. So I get it, but I don’t like the behavioral kind of like outcomes that this could create.

Ryan Isaac:
Yeah. I don’t… Do you know the details around this? Like how often and out of like every, like each account, can they take a thousand bucks out of each account?

Matt Mulcock:
I think it’s total.

Ryan Isaac:
I’m sure we’ll learn more.

Matt Mulcock:
Yeah. Let’s actually see live this…

Ryan Isaac:
If it’s capped like the total once per year out of all accounts combined or per household, I think I could maybe get behind that. For now, again, these laws are for the average American. I hate it for the average dentist.

Matt Mulcock:
Yes.

Ryan Isaac:
Because I love, I love 401 [k] s and IRAs for the average dentist ’cause they’re untouchable from like a… They’re just a pain to touch because they’re taxed and penalized.

Matt Mulcock:
Yep.

Ryan Isaac:
So I love it and I’m glad that people can’t touch it. For the average person out there struggling with inflation and groceries costing what they and rent and everything. That’s probably really helpful to people. But it depends what the caps are for these.

Matt Mulcock:
Yeah. So this is…

Ryan Isaac:
I mean, for a dentist, a thousand bucks is like kind of negligible.

Matt Mulcock:
Yeah. For a dentist, this wouldn’t mean much. I can’t imagine. Because if there’s a dentist… I might offend some people, but if there’s a dentist out there that needs to use this rule, then they’ve got bigger problems.

Ryan Isaac:
Yeah, probably it’s big problems.

Matt Mulcock:
They’ve… We got some bigger problems.

Ryan Isaac:
It’s probably big problems in career or the practice.

Matt Mulcock:
So this is new rules. Let savers make one withdrawal of up to a $1000 a year for personal or family emergencies. It takes into effect 2024. It waives the 10% penalty. So…

Ryan Isaac:
Yeah.

Matt Mulcock:
They can self-certify in writing that they need the funds for an emergency. So it’s basically…

Ryan Isaac:
Waives the penalty but you still pay the tax on it.

Matt Mulcock:
Still pay tax.

Ryan Isaac:
Okay.

Matt Mulcock:
Exactly. Right.

Ryan Isaac:
Okay.

Matt Mulcock:
And by the way, just really quick on this, if you have any Roth contributions, this is probably again for a dentist, this hopefully shouldn’t apply anyway, but if you have any Roth contributions you’ve made at any point, you can access those contributions at any point anyway.

Ryan Isaac:
Yeah. Roths are accessible. Yeah.

Matt Mulcock:
Yeah. That’s a big misconception with Roths. So you put money into a Roth as a contribution, you can pull that money out. Those particular contributions you made at any point because you didn’t… Or because you already paid tax on that money.

Ryan Isaac:
Which kinda rolls into the next point. People save money… Business owners when they have kids on payroll, save money into Roths for their kids.

Matt Mulcock:
Yep.

Ryan Isaac:
Which is great because they’re very flexible.

Matt Mulcock:
Very flexible.

Ryan Isaac:
And have been more flexible compared to like a 529.

Matt Mulcock:
Yep.

Ryan Isaac:
However, now, what’s the 529 rule?

Matt Mulcock:
Now they’ve made rules where you can… And we just did a podcast on this on 2 Cents. 2024, you can now start rolling 529 funds that are unused into a Roth IRA. There are some caveats here. Do you wanna break down all the caveats?

Ryan Isaac:
Yeah, we’re at 40 minutes. Why not? I’m sure some of this will get cut. [laughter]

Matt Mulcock:
Okay. Probably some parts.

Ryan Isaac:
Probably the inappropriate joking and laughing hysterically that no one’s ever gonna hear unless the editors miss this.

Matt Mulcock:
Yes.

Ryan Isaac:
Which would be hilarious. [laughter]

Matt Mulcock:
Maybe they do.

Ryan Isaac:
Okay.

Matt Mulcock:
Okay. Quick caveats. A lifetime maximum of this of $30,000.

Ryan Isaac:
Okay.

Matt Mulcock:
As of right now.

Ryan Isaac:
Okay.

Matt Mulcock:
They have not defined this specifically, but my interpretation of it is it’s $30,000 per beneficiary.

Ryan Isaac:
That would make sense.

Matt Mulcock:
Per lifetime.

Ryan Isaac:
Yeah.

Matt Mulcock:
The account has to be open meaning the 529 has to be open for 15 years before you can even do this.

Ryan Isaac:
Oh.

Matt Mulcock:
Starting now. So…

Ryan Isaac:
Oh really?

Matt Mulcock:
Yeah, 15 years and…

Ryan Isaac:
Starting in 2024, basically.

Matt Mulcock:
Yes. And the contributions made to the 529 have to be five years old. So it’s…

Ryan Isaac:
Okay.

Matt Mulcock:
The account has to be open for 15 years and then any contribution made has to sit in the 529 for at least five years.

Ryan Isaac:
The 15 year clock…

Matt Mulcock:
Before you roll over.

Ryan Isaac:
Starts in 2024 though?

Matt Mulcock:
Yes.

Ryan Isaac:
Wow. So people who have had 529 for 15 years up this point.

Matt Mulcock:
Actually, that’s another thing they haven’t officially defined, I don’t think.

Ryan Isaac:
When the clock starts on that?

Matt Mulcock:
Is if I opened up a 529, 15 years ago…

Ryan Isaac:
15 years ago as of now.

Matt Mulcock:
Can’t do it now.

Ryan Isaac:
Yeah.

Matt Mulcock:
I don’t know that actually.

Ryan Isaac:
Okay. All right.

Matt Mulcock:
But either way, 529 has to…

Ryan Isaac:
And then we’d go into the beneficiary’s name, a Roth and the beneficiaries like the kids…

Matt Mulcock:
The names have to match.

Ryan Isaac:
Yeah. Okay.

Matt Mulcock:
Yeah. So…

Ryan Isaac:
So the 529 for little Sally…

Matt Mulcock:
Yep.

Ryan Isaac:
Is gonna go into little Sally’s Roth.

Matt Mulcock:
Yeah, I can’t be like Sally going to Robert’s or Robert’s going to Sally’s, that’s gotta be…

Ryan Isaac:
Yeah, or back to dad’s Roth.

Matt Mulcock:
You can’t do that, yeah.

Ryan Isaac:
Like Sally, you’re not… I’m not… I’m taking my money back.

Matt Mulcock:
Exactly.

Ryan Isaac:
Yeah.

Matt Mulcock:
The other thing is you can’t do it in one year. So the contribution limit is the same as the role… The limits are the same…

Ryan Isaac:
6500 a year.

Matt Mulcock:
: Exactly.

Ryan Isaac:
[chuckle] Interesting. Okay.

Matt Mulcock:
So it’s like… People, when they heard this headline, it was like, “Oh my gosh, this is amazing.

Ryan Isaac:
Strategies.

Matt Mulcock:
This makes 529’s better. It sort of does.

Ryan Isaac:
Yeah.

Matt Mulcock:
But not really. I’d still would say a Roth is better than a 529.

Ryan Isaac:
Yeah, just that’s more simple.

Matt Mulcock:
Yeah.

Ryan Isaac:
It’s cleaner.

Matt Mulcock:
Yeah.

Ryan Isaac:
Okay. Well, that’s the thing.

Matt Mulcock:
And then companies can match student loan payments with retirement contributions.

Ryan Isaac:
This might be a big deal for practice owners with new associates with high student loan balances. Say, hey, we have… And to market this. I mean, I dunno the details of this, but I’m just imagining you as a competitive advantage of being a good employer, which is now like the new marketing. You now have to not only market to patients as the dentist, the clinician, the practice. You have to now market to your potential employee pool.

Matt Mulcock:
Yep.

Ryan Isaac:
Cause it’s just so competitive and building a good team is the commodity nowadays. So I imagine likif you had a plan and you were savvy about the way you marketed your employee packages especially to associate dentists or even other employees who have student loans.

Matt Mulcock:
Yep.

Ryan Isaac:
Say, hey, we can help you pay off your student loans.

Matt Mulcock:
Yep.

Ryan Isaac:
You know. I mean some really simple messaging around that would probably go a long way.

Matt Mulcock:
Oh. Yeah, definitely.

Ryan Isaac:
In attracting good talent.

Matt Mulcock:
There’s some other caveats and things to this. We can circle back on that and probably do a whole other segment just on that.

Ryan Isaac:
Yeah, we’ll probably follow up on all of the stuff as it comes out.

Matt Mulcock:
Yep. Okay. So last one for 2024, Roth 401 [k] s and Roth 403 [b] s no longer have RMDs. It’s ridiculous that they did even in the first place. But again, this is just saying that if you have any Roth contributions made to a 401 [k], you no longer have to pull money from those at the age of 72 or 73.

Ryan Isaac:
Which is gonna be helpful when we get to 2026. When we get to the rule in 2026.

Matt Mulcock:
Yes.

Ryan Isaac:
Which I think will actually start to be significant. Having a Roth 401 [k] or a chunk of money in your 401 [k] that’s Roth, will start to become more significant starting in 2026.

Matt Mulcock:
Yep.

Ryan Isaac:
For people. Okay.

Matt Mulcock:
So…

Ryan Isaac:
Onto 2025. [laughter]

Matt Mulcock:
Onto the next year, 2025, employers must automatically enroll employees into retirement plans.

Ryan Isaac:
Yeah.

Matt Mulcock:
So…

Ryan Isaac:
So when you set it up, they have auto-enrolled, they have to opt out.

Matt Mulcock:
It’s an opt out versus an opt in. Exactly, right.

Ryan Isaac:
Yeah. Okay.

Matt Mulcock:
And this all comes from famous study done by our boy Richard Thaler.

Ryan Isaac:
And by our boy, we mean no connection whatsoever. [laughter]

Matt Mulcock:
Zero connection to Richard Thaler.

Ryan Isaac:
You just like him. Yeah.

Matt Mulcock:
I just like him.

Ryan Isaac:
Okay.

Matt Mulcock:
He does amazing work. He wrote the book, ‘Thinking, Fast and Slow.’

Ryan Isaac:
Yeah.

Matt Mulcock:
And he’s done tons of work on this. He’s kinda like the godfather, I think of a lot of this. Like behavioral finance and things.

Ryan Isaac:
Yeah.

Matt Mulcock:
So he did a study with some… A group of people that found the simply by making retirement plans opt out versus opt in. And I don’t know the exact numbers of this but it was like astronomically different. It was like, you are 75% more likely or something like this to actually save in retirement plan.

Ryan Isaac:
Yeah. Soon as it makes you do it.

Matt Mulcock:
You don’t even think about it.

Ryan Isaac:
Yeah.

Matt Mulcock:
So if your employer may… Like you sign up with an employer, you’re an associate that goes and starts with a practice. And you sign some things, whatever. And part of the things that on the employee agreement is like, you are opted in to our 401 [k] at 3% whatever match. And you just see it, whatever, the chances of you opting outta that, extremely low.

Ryan Isaac:
Yeah.

Matt Mulcock:
And all of a sudden you’re 5, 10 years in and you’re like, “Oh man, I just saved…

Ryan Isaac:
I did… I saved something.

Matt Mulcock:
I saved something.

Ryan Isaac:
I’m constantly… I’m never not amazed and the more in my own personal life I go through things, I am constantly amazed by the power of outside accountability.

Matt Mulcock:
Yep.

Ryan Isaac:
And just forcing us as humans who tend not to stick with things very long to just keep doing it.

Matt Mulcock:
Yep.

Ryan Isaac:
It’s amazing.

Matt Mulcock:
And to remove the thinking from it, like you don’t think about it.

Ryan Isaac:
Just get rid of the friction, just force you to do something healthy for yourself outside accountability is just like… It’s the secret formula for everything.

Matt Mulcock:
Yep.

Ryan Isaac:
All right.

Matt Mulcock:
And the wild thing about that is, again, you’re not even thinking about it. Guess what happens? Are you technically bringing home less money at that point? Yes. But you magically adjust. We just… That’s just how it happens.

Ryan Isaac:
We magically adjust. We always…

Matt Mulcock:
You… We just magically adjust.

Ryan Isaac:
Yeah.

Matt Mulcock:
Okay, where are we at?

Ryan Isaac:
2025 part-time employees, so.

Matt Mulcock:
Okay, so part-time employees.

Ryan Isaac:
The threshold to qualify.

Matt Mulcock:
Yep. So now it is, right currently most planned designs are, you can exclude part-time employees. So anyone less than 1000 hours worked in a 12 month period, you can generally exclude them in 2025 part-time employees. So 500 hours worked in a two year period are eligible for workplace retirement plan.

Ryan Isaac:
Used to be a thousand hours in a year.

Matt Mulcock:
It used to be a thousand hours in a year, yep.

Ryan Isaac:
So just easier for people to sign up.

Matt Mulcock:
Exactly.

Ryan Isaac:
For your employees to sign up. Which I don’t think is a bad thing.

Matt Mulcock:
No.

Ryan Isaac:
Yeah, I don’t think it’s a bad thing.

Matt Mulcock:
And then last one of 2025, $10,000 catch-up contributions on top of everything else for…

Ryan Isaac:
Oh, for 60 to 63.

Matt Mulcock:
For 60 to 63.

Ryan Isaac:
It’s a funny little age range.

Matt Mulcock:
I know. It is odd.

Ryan Isaac:
So catch-up contributions over 50 year 7,500 bucks, but then you hit 60 and it jumped to $10,000 until you’re 63. And then they’re like, “No more catch-up.”

Matt Mulcock:
I get it. That’s kind of weird. Like, now you’re done.

Ryan Isaac:
I want keep working.

Matt Mulcock:
Yeah.

Ryan Isaac:
It’s like it was only three years.

Matt Mulcock:
Took that final push.

Ryan Isaac:
Please can I have a little more?

Matt Mulcock:
Yeah.

Ryan Isaac:
Please sir, may I have some more catch-up.

Matt Mulcock:
Add some more, please catch-up.

Ryan Isaac:
Add some more catch-up. Please sir.

Matt Mulcock:
You only get three years worth. And then, okay, so 2026.

Ryan Isaac:
Yeah.

Matt Mulcock:
This is big one.

Ryan Isaac:
This is… Yeah, this is an interesting one.

Matt Mulcock:
This is a big one. Catch-up contributions are required to be Roth. They’re required to be Roth contributions in 401 [k] s and 403 [b] s.

Ryan Isaac:
Yeah, so up to this point, let’s take that 60-year-old, where, what’s the limit for next year? It’s 23,500 or is it going to 24? What’s the 401 [k]?

Matt Mulcock:
I dunno if they’d actually said yet. I think it’s still 22,500. I will find out.

Ryan Isaac:
So let’s say it’s 22,500 plus a $10,000 catch-up ’cause you’re 60. Now we’re at 33,500. If there’s two of you, a spouse at 60 year older, now we’re at such a high amount of pre-tax contributions. However…

Matt Mulcock:
23,000 by the way.

Ryan Isaac:
23,000 plus 10. So yeah, it’s like 33,000. We have $66,000 between two people. However, now we’re saying in 2026 that catch-up, whether it’s 7,500 for 50 year older or 10,000 for 60 year older. Now that catch-up is forced to be Roth contributions.

Matt Mulcock:
Yep.

Ryan Isaac:
So you don’t get the deduction for that.

Matt Mulcock:
Correct.

Ryan Isaac:
But we’re saying if you’re starting at 50 years old and you go 10 years at 7,500 bucks of catch-up in Roth, it’s 75 grand and then an extra three years at 10,000.

Matt Mulcock:
Yeah.

Ryan Isaac:
It’s 30 grand. So we’re talking about…

Matt Mulcock:
Plus growth.

Ryan Isaac:
A plus growth, a six figure amount of money in a Roth account that now also says there’s no RMDs in your 70s for it.

Matt Mulcock:
Yep.

Ryan Isaac:
So now we’ve got six figures for a doctor and a spouse. If spouse is on payroll with no future RMDs in a Roth account, that they can’t get that much in a Roth account through a backdoor Roth or directly qualifying unless they did a Roth their whole career. Like a backdoor Roth their whole career.

Matt Mulcock:
Exactly.

Ryan Isaac:
So I think that’s big. Although on the tax deduction side, it’s a little like bummer.

Matt Mulcock:
Yeah, it is a bummer. You don’t get as much savings.

Ryan Isaac:
Yeah.

Matt Mulcock:
But I do think it is the same thing, it forces you to reallocate some funds in a diversified way.

Ryan Isaac:
Yeah.

Matt Mulcock:
And that’s the whole point when we talk about what as financial planning nerds will call it asset location, right? Where are you actually putting your money?

Ryan Isaac:
Yeah.

Matt Mulcock:
The idea is that by the time you go to retire, you would have some money in, hopefully a bunch of money in a brokerage account, hopefully a bunch of money in pre-tax accounts like a 401 [k]. And then hopefully some money in Roth.

Ryan Isaac:
Yeah.

Matt Mulcock:
‘Cause all three of those buckets are taxed differently.

Ryan Isaac:
Yeah.

Matt Mulcock:
So you get into retirement, you’re able to be more strategic with how you pull money out. So again, this kind of is a… I would look at this as a good thing. It’s just forcing you to… You don’t even have thought in this.

Ryan Isaac:
Yeah.

Matt Mulcock:
You just, if you’re over the age of 50, any catch-up amount has to go after tax in a Roth, in the Roth bucket of that account.

Ryan Isaac:
Yeah.

Matt Mulcock:
You’re still getting significant tax savings on the contribution itself.

Ryan Isaac:
It’s still a lot.

Matt Mulcock:
And we were saying this earlier, if you’re doing profit sharing.

Ryan Isaac:
Yeah.

Matt Mulcock:
On top of that.

Ryan Isaac:
Yeah.

Matt Mulcock:
You can still put in quite a bit of money, pre-tax.

Ryan Isaac:
You can still get a lot in there so yeah.

Matt Mulcock:
And then the last one, we’re going out to 2033 now.

Ryan Isaac:
Geez.

Matt Mulcock:
2033.

Ryan Isaac:
I’ll be 53 years old.

Matt Mulcock:
Bruh, when you think about that, it’s not that far away.

Ryan Isaac:
It’s not that far away. And you know what’s crazy? Anyone older than me is just gonna be like, “Shut up Ryan.” Which is fair.

Matt Mulcock:
Most of those people don’t listen to us anyway.

Ryan Isaac:
But like, yeah. But that…

Matt Mulcock:
Idiots.

Ryan Isaac:
That’s just no longer seems old to me. That used to seem really old to me.

Matt Mulcock:
Yeah.

Ryan Isaac:
53 years old.

Matt Mulcock:
And now you’re like…

Ryan Isaac:
I hang with 53 year old surfers who are like killer athletes. [laughter]

Matt Mulcock:
Shredding, yeah.

Ryan Isaac:
I’m just like, I wish I could…

Matt Mulcock:
And the 10 year olds that are shredding.

Ryan Isaac:
And then there’s the 10 year olds.

Matt Mulcock:
Yeah.

Ryan Isaac:
Who are like prodigies, but whatever.

Matt Mulcock:
Yeah.

Ryan Isaac:
So, anyway.

Matt Mulcock:
So in 2033, the RMD age increases again.

Ryan Isaac:
Yeah.

Matt Mulcock:
From 73 now to 75.

Ryan Isaac:
That’s cool.

Matt Mulcock:
So it allows you…

Ryan Isaac:
I think it’s good.

Matt Mulcock:
To just have that much more time…

Ryan Isaac:
Before you’re forced to take…

Matt Mulcock:
Before you’re required to pull the money out.

Ryan Isaac:
Which for a dentist is significant because so much money for the average dentist is after tax funds because of the way you build up your net worth.

Matt Mulcock:
Yeah.

Ryan Isaac:
Throughout your career outside of retirement portfolios. For the average American, most of their, if they have any, most of it’s gonna be sitting in a company 401 [k].

Matt Mulcock:
Yeah.

Ryan Isaac:
Very little savings outside of that, yeah.

Matt Mulcock:
That opens up actually a lot of strategies for like what I was saying earlier for like Roth conversion strategies in retirement. Let’s say you’re…

Ryan Isaac:
Oh yeah.

Matt Mulcock:
Let’s just… Really quick, let’s say you’re a dentist. You retire at 65 and you’re at the, let’s say you retire at 65 post 2033. So now the RMD age is 75. So you have a 10 year window to start moving money from your pre-tax accounts to Roth.

Ryan Isaac:
Yeah.

Matt Mulcock:
And do again, a conversion strategy in a tax efficient way.

Ryan Isaac:
Yeah.

Matt Mulcock:
Talk to your CPA, allows you a full decade to start moving money over to Roth that hopefully by the
time that 10 year window is up…

Ryan Isaac:
It’s gone, yeah.

Matt Mulcock:
You never have to even take RMDs.

Ryan Isaac:
You don’t have any RMDs.

Matt Mulcock:
And that money can continue to grow tax free.

Ryan Isaac:
Yeah, Roth conversion strategy.

Matt Mulcock:
Yeah, it’s fantastic.

Ryan Isaac:
I like it. All right, that was scary. That was entertaining. That was fun. I had a good time.

Matt Mulcock:
I enjoyed myself.

Ryan Isaac:
I…

Matt Mulcock:
Hopefully, it was helpful as well. That’s the key.

Ryan Isaac:
I think it’s helpful.

Matt Mulcock:
We always say, whenever we do anything like this, we hope we have two goals, right? We hope it’s helpful, adds value. And then number two, we hope it’s fun.

Ryan Isaac:
Yeah, we hope it’s fun for you. We had a good time. I had a good time. You have had a good time?

Matt Mulcock:
I loved it.

Ryan Isaac:
Thanks for being here. We’ll catch you next time on another episode of the Dentist Money Show. Bye-bye now.

Retirement Plans, Year-End Planning