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September 4, 2018
Last week President Trump signed an executive order to expand access to employer sponsored retirement plans such as 401Ks.
How big a deal is this?
The purpose is to get more employers to offer sponsored plans to their employees – especially companies with smaller number of employees. Forty Seven percent of all employees that work in companies with less than 100 employees have no employer savings plan.
First, to be clear, all that has been accomplished is that the administration has directed the Departments of Labor and the Treasury to consider ways to improve notice requirements to reduce paperwork and administrative burdens on the employers. So, moving at the speed of government, we will likely see some regulatory easing of regulation and the ability for smaller companies to join with other companies to offer Multiple Employer Plans. The objective is to lower the administrative costs and burdens, and make it more attractive to small businesses.
When it comes to self-directed IRAs, this change will result in more people having access to employer plans which they one day will roll over to a NuView Trust account.
But the bigger deal is this…
The Department of the Treasury is also to review the rules on required minimum distributions (RMD) from retirement plans to see if retirees could keep more money in 401(k)s and Individual Retirement Accounts longer. This could be huge… the dreaded RMDs have been the bane of financial planners since IRAs were created. In 1975, when IRAs were created, the average life expectancy was 72 years, or about seven years above the retirement age of 65. Today, two generations later, the US life expectancy is over 78 years or double the retirement phase. The awkwardness of rules that force people to take out their retirement savings long before they need them, and then potentially running short due to longer lifespans needed to be addressed. Let’s hope that the Treasury Department moves quickly – or at least before I reach 70 1/2!
Keep in mind, if you want to eliminate the need for RMDs at all, you can convert your taxable IRA such as Traditional, SEP and Simple IRAs to a Roth IRA and never be forced to take another distribution. Once converted, your beneficiaries may never have to pay tax on their distributions as well.
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