2025 Year In Review: What Actually Mattered for Your Money

On This Episode

A lot happened in 2025… Big political swings, stubborn inflation, new tax rules, and even a historic government shutdown. But what actually matters for your financial life? Today, we’re breaking down the year’s biggest headlines and what they may mean for your plan moving forward.

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More Episodes

 

Check out all the episodes by clicking here.

Disclaimer: PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

 

Marc:

A lot happened in 2025, big political swings, stubborn inflation, new tax rules, and a historic government shutdown. But we’re going to talk today about the biggest headlines and what they actually mean moving forward, if at all. So, stick around, and let’s get into this conversation here on Retirement Planning Redefined.

 

Everybody, welcome into the podcast with John and Nick and myself here to talk investing finance and retirement, and a little year-end review going on this week here on the podcast, guys. A lot happened this year, so a lot to break down, but we’ll jump in and say hey to the guys. And congratulations, Nick, on being a married fellow this time around.

 

Nick:

Thank you. I appreciate it.

 

Marc:

Yeah, everything go smoothly?

 

Nick:

Yep, everything went smooth. We had a little rain scare, which doesn’t usually happen too much this time of year, but it all worked out.

 

Marc:

Nice. Very nice. John, did he behave himself? Was he good?

 

John:

He was good. I pulled up to the venue. He looked very relaxed in shorts and a t-shirt and I was all decked out and there was a problem with the situation here. He was very chill and I was dressed up way too early.

 

Marc:

Nice.

 

John:

So, no, he was excellent. He was very happy and it was a good day all around.

 

Marc:

Awesome. Well, very cool. Congratulations to you again, and the misses. And then with that, let’s jump in and roll back the clock a little bit, guys, to April of 2025. Here we’ll start there with the Liberation Day, right? So, the market didn’t like it at first. So, let’s talk about that.

 

Nick:

Yeah. So, this is all kind of in reference to when the main tariffs were announced earlier this year. And really, kind of the thought process is to kind of look back and in retrospect in a somewhat recent time, look back and see things that may have freaked people out over the past year when it was kind of an acute situation, and then kind of the short-term results and then slightly longer term result. And so, when the tariffs were announced, there was massive drawdowns in the market. There was really a substantial pullback. There was dealing with inflation, market volatility, etc.

 

And in retrospect, looking back over this year itself, as we approached the end of the year, from a market perspective, ended up being a very positive year. And then when you look at it from the point in time at which we kind of bottomed out after the tariff news and there was a substantial drawdown, there was really a big run-up. So, it’s just kind of the perspective of what went down and how it happened is interesting to look back on.

 

Marc:

Well, John, if you think about it, right, much like the COVID response, it was very much a V, right? So, it was a lot of sky is falling, doom and gloom, down 20% some indices, but then what, by May or June at the latest, it was back.

 

John:

Yeah, it’s a little bit of a kind of yo-yo type thing. I remember that month it was down, kind of some potential news came out that happened wasn’t real news, kind of came up a little bit and then went back down. And ultimately, the big takeaway as you compare it to COVID is stay of the course. We harp on having the plan in place and that goes on top of your investment plan. So, if you have a specific allocation, if you’re moderate, aggressive, conservative, income based, whatever it might be, you really want to not panic when things like this happen because ultimately, especially with media nowadays, there’s a lot of knee-jerk reactions. So, I think a big takeaway from this is stay the course, don’t panic, just trust in your plan if you’ve actually taken those steps to do a comprehensive plan for overall planning and also investment planning.

 

Marc:

And granted, it’s understandable when some things are happening that maybe are a little bit outside the norm to be worried. And talking with advisors across the country, if you had clients here and there that were concerned about it, but to your point, yeah, if you had a good strategy in place, it’s like, look, this is just another set of headlines that every year it’s kind of something, right? And so, kind of thinking about that as we’re moving through the year again on this year in review, the Fed chair and the White House stayed in a tit for tat match about rates. And so, Nick, you mentioned inflation. Well, it kind of persisted on through 2025.

 

Nick:

Yeah, that is something, it’s interesting to see, and I think your typical consumer gets… It’s pretty confusing to sift through inflation data because it is looking at it kind of like year over year typically. And then, there’s different messaging that you get from the government, administrations, etc. But I would say that as we have gone through plans, updated expenses with clients, probably the number one topic that has been discussed and the main pressure point for people has been inflation, both this year, the previous couple of years as well. And not only on “smaller” items like groceries, which, and when I say smaller, I mean from a dollar perspective, how much a one item of a grocery cost, whether it’s milk, ground beef. We had the egg drama earlier this year where eggs went out of control and my now wife eats a lot of eggs, and all these different things.

 

But not only that, but the kind of the persistent inflation that has happened with larger items such as cars and the cost of cars now, and just kind of how prices have run up on homes and really kind of locked a lot of people out of the housing market in a lot of different parts of the country. It’s really kind of hitting people from all angles, and unless something changes soon, it’s going to be kind of a new normal for people moving forward.

 

Marc:

Yeah, it’s been rough. I mean, certainly, and it stayed very persistent. And again, they were kind of going back and forth about what was going to happen with some of that. But John, I guess the upside to that is that high yield savings accounts sort of stayed strong throughout the year because they weren’t willing to lower the rates until we get to the end of the year.

 

John:

Yeah. So, this is benefiting that clientele or person that has a decent amount in emergency savings or has some cash on hand, where a few years back, it’s like you’d be lucky to get 1%. You’re having conversations that, “What are you getting in your high yield savings?” It’s like, “One and a half,” and you’re getting excited for that. Now, last year we were in kind of the mid-fours in this kind of high-yield savings, and now it’s kind of creeped down to mid-threes to high fours, if you can find something, I’m sorry, mid-threes to low-fours, depending where you are. So, it’s definitely getting a little more bank for your buck in your savings accounts, which is helping out some retirees that have some cash on hand.

 

And then, alternatively to that is that when we’re building portfolios for clients, we are using some high-yield savings as a bond alternative. Now, not the whole piece of it, but we are maybe taking a piece of, let’s say, fixed income if it’s 50% of the portfolio, maybe we’re taking 10, 20% and doing high-yield savings because it’s a little bit less volatile than the bond market.

 

Marc:

Gotcha. So it’s still safe, but still productive, or at least a little bit more productive than it had been. Yeah.

 

John:

Yeah. Just diversifying within that asset class itself.

 

Marc:

Gotcha.

 

John:

So, if you’re not taking advantage of this, I would highly recommend talking to your advisor about, “Hey, I got some cash on hand sitting in a checking account.” I don’t want to call out some banks, but some banks are still giving you not much if you don’t look at what you’re doing. So, important to take a look at how much you have in emergency savings and could you be getting an additional 3%? And that money starts to add up, especially when we talk about the higher cost inflation items like groceries, in Florida here insurance is crazy. So, any bit counts.

 

Marc:

Okay. Well, as we’re moving along through the year, we’re trucking along, we get to probably the biggest news of the year, maybe, maybe not. We’ll see. But the One Big Beautiful Bill, the OBBBA, right, the One Big Beautiful Bill Act in July. Nick, kind of the biggie, the big takeaway was we got to stay in the same tax brackets, which is very good for the next at least a few years anyway.

 

Nick:

There’s definitely a lot of provisions. It is really interesting because this year, and we’re almost at the end of it here, it almost feels like each quarter of this past year has felt like a year mentally where there was kind of the things that ran up with the optimism in the market, then tariffs brought the market down. Then we kind of had the slowdown. Then the Big Beautiful Bill kicks in mid-year, that helps to move markets up. And then, as we’ve been talking about savings accounts and things like that, it’s been an interesting thing because you’ve got people that, excuse me, were really enjoying the five plus percent, especially because they remembered just a few years ago, as you guys talked about, sub one, sub two. But now as we start to trend down, the push, and really it’s kind of exacerbated by the bill, is really focused on growth.

 

So with growth, lower taxes, investment, and those yields are going to start to come down again. So, it’s a tricky time for people because they’re looking at rates dropping, market looks soft with things like employment, stuff like that. At the same time, the government’s doing a lot of things to try to prop up the market. And the feedback that we’re getting from people is that it’s a very confusing time and what’s going on. So, with the Big Beautiful Bill, as you mentioned, the tax change, obviously one of the biggest things for a lot of our clients that are in retirement or approaching retirement is the additional deduction in social security income. And how that works is it was marketed as a tax-free social security, but the reality is for a single filer with modified adjusted gross income under $75,000, they can get a credit of up to $6,000, and married filing jointly, $6,000 each for married filing jointly with income under $150,000.

 

So, one of the angles and one of the things that some clients have done is like, “Hey, I have this extra deduction,” potentially looking at things like Roth conversions to offset that, but take advantage of being able to turn money into tax-free upside, stuff like that is important. So, as we sift through the One Big Beautiful Bill, it is providing additional strategies from an advisor perspective, from an attorney perspective when clients are working with attorneys to try to take advantage of the things that are happening from that.

 

Marc:

Yeah. And being effective there definitely for sure because it’s probably short-lived, right, and let’s be honest, the political wins, the way they’re doing things and everybody wants to kind of undo the previous person’s stuff, they could be short-lived, ’28 and ’29 maybe max. So, be efficient where you can be, especially for seniors, John, with some of those extra provisions.

 

John:

Yeah, yeah. Like Nick mentioned, that’s the biggest one we’ve seen clients kind of, their impact is how do they take advantage of it? So, one thing we’ve been doing is monitoring income distributions from what accounts. So, we’ve been cautious of where are we taking money out to try to continue to receive those deductions, whether single or married filing jointly. And something we do for clients is Roth conversions, which now requires a little more detail of how much are you going to convert? Before, the main thought was, let’s try to keep you within the same tax bracket and not go above in the next tax bracket to basically minimize what we’re paying in the Roth conversions. Now, it’s a matter of let’s keep you in the same tax bracket and let’s make sure you still qualify for this new deduction. So, it requires a little more planning on our end, but ultimately it’s a nice benefit for anyone above the age of 65.

 

Marc:

There you go. Exactly. So, again, as always, if you need help with that stuff, make sure you’re talking with your financial professional or reach out to John and Nick at PFG Private Wealth. Obviously, there’s a lot of nuance to it. So, we’ll round out the year guys here. We’ll wind it down with the last big event. At least we have two weeks to go in the year, hopefully nothing else happens at the time we’re taking this.

 

John:

What do we got? 14 days left?

 

Marc:

14 days left at the time of tape for this, right? So, the record-breaking 43-day shutdown. Now look, I don’t want to make light of the fact that people who are directly affected by this and a lot of federal employees and stuff certainly gets rough. But my take from this is that a lot of things don’t seem to care anymore. They’ve made this such the norm, not maybe necessarily the length of this, but the constant shutdowns that the market, for example, did not care, right? So, it just kind of shrugged it off. As a matter of fact, we set the all new highs on most of the indices during this, right? 6,900 and some change on the S&P.

 

So, what’s your take on it and what do you guys kind of think about it? Nick, I’ll let you start. Obviously, again, if you’re a federal worker, obviously there’s things that impact you, but for the most part, it seemed like everybody else just kind of shrugs this off because it’s become the new norm, sadly.

 

Nick:

Yeah. It’s another kind of instance or example of headline grabbing news, and then trying to figure out how exactly it’s applicable to you.

 

Marc:

Political pokership theater, for sure.

 

Nick:

Yeah, for sure. If you’re somebody that wasn’t a federal employee, then probably the biggest impact that you had was being impacted if you were trying to travel. I can tell you that as we were getting ready for the wedding and things were getting close to with the shutdown still going on and the travel disruption that we were seeing, we started to have some concerns because we had a lot of people coming in from out of town. So, we were happy that it had gotten, personally, that it had gotten fixed from that perspective.

 

And then, some of the SNAP benefits that were talked about quite a bit where lower income people being negatively impacted and for important things such like food, especially with what we’ve been talking about with inflation and the cost of food going up so much, it was an emotional time for a lot of people. But here, we sit a few weeks past it shutting down and it starts to feel like it was a long time ago. So, it is-

 

Marc:

And they’re already talking about doing it again in February or March, right? So, it’s always something.

 

Nick:

… Yeah. Yeah, it’s a leverage point that the parties try to use to get what they want. I would say, from the perspective of, and going back between the One Big Beautiful Bill and everything else that was going on that we didn’t address was the change in subsidies for exchange on the health insurance market.

 

Marc:

Oh, yeah.

 

Nick:

And how these all tie together, because I would say that that is something that actually has a fairly significant impact on some of our clients. We’ve seen clients’ premiums doubling, clients that retired before 65 that have been paying maybe somewhere between $500 and $1,000 a month with subsidies, and those subsidies being removed, we’ve seen premium increases to two and possibly $3,000 a month, which has a pretty substantial and significant impact. So, that is something that I would be surprised, and I think a lot of people would be surprised if there isn’t some sort of solution at some point, but that is, I would say, probably the most substantial impact for a lot of people coming out of that.

 

Marc:

Yeah. And John, I would think another piece to think about from the shutdown at least, is I feel like tying this back to COVID a little bit, right, is people maybe realizing, okay, maybe I need to kind of have that emergency fund shored up. Whether you are actually affected with it by being a federal employee or not, I think people started to kind of feel like, “Well, hey, could this leach into something else?” I know a lot of first time seniors in my mom’s senior building were like, first time senior, excuse me, first time social security filers, they’re like, “Do we still get benefits?” Right? So, there’s a little confusion there.

 

John:

Yeah, and I think going back to planning, one of the big things we do is making sure people do have an emergency fund to weather any storm that comes aware, to be flexible to adapt.

 

Marc:

Right.

 

John:

So whether it’s your own, your own career, your own job, and it’s just, yeah, exactly. It’s whatever field you’re in, whether it’s a loss of a job or layoffs, which we’ve unfortunately heard quite a bit this year of some companies laying some people off, you want to have that emergency fund to be able to pull on. Or, again, we talked back about on the tariff day there, Liberation Day. If you add some cash savings and the market dipped, it’s nice to have that cushion to pull on for that period of time. So, highly recommend having an emergency savings. Ultimately, it helps people think a little bit more clear when things happen, and it’s a nice kind of comfort level to have that.

 

Marc:

Yeah, that’s a great point, right? It just gives you a little bit of that buffer so you can make some more sound decisions. And of course, having a strategy and a plan will help you make some of those sound decisions as well. So as always, if you’ve got some questions, need some help, have that 15-minute chat with John and Nick and the team at PFG Private Wealth. Find them all online at pfgprivatewealth.com. That’s pffgprivatewealth.com. Get yourself some time onto the calendar. Yeah, it’s the end of the year, but go ahead and set up some time to talk with them in the beginning of the new year. Don’t keep procrastinating. Reach out, especially if you’ve got some concerns that you know you need to address.

 

And don’t forget to subscribe to the podcast on Apple or Spotify or whatever app you enjoy using. And we will see you next time here on Retirement Planning Redefined. For John and Nick, I’m your host, Mark. We’ll catch you later.

 

Ep 13: Secure Act Changes – Stretch IRA

On This Episode

We continue our conversation about the SECURE Act. Another big piece to this new law is the removal of the stretch IRA. Nick walks us through the things we need to know about this big change.

Subscribe On Your Favorite App

More Episodes

Check out all the episodes by clicking here.

 

Disclaimer:

PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:

Mark: Hey, everybody. Welcome into another edition of Retirement Planning Redefined. Thanks for tuning into our podcast about investing, finance and retirement with the guys from PFG Private Wealth. On this episode, just Nick joining me again. That’s all right. I like talking to Nick. How are you buddy?

Nick: Pretty good. Pretty good.

Mark: Hanging in there. Hope you had a good week since the last time we talked.

Nick: Yeah, absolutely. This is kind of my favorite time of the year from the standpoint of climate in Florida. Most people are in a pretty good mood overall, including myself.

Mark: Well, I’ll tell you what, you guys have in the weird weather we are? It’s in the 70s in North Carolina.

Nick: It’s definitely warmer than I prefer, but I know that it’s going to kind of cool back down. It’s still at least not 90 for four months in a row. I’ll take it.

Mark: Well, the bad part about the warmer winters is it doesn’t get a chance to kill the bugs. I’m showing my old man age there by that, but it’s really true. Every year I get older, it’s like, man, we do kind of need a cold snap during the winter to kind of kill off some of the stuff that is going to haunt us come spring in summer, right? We don’t get rid of some of those bugs. It just makes it that much worse. Hopefully another cold snaps on the way.

Nick: You must live near the woods.

Mark: Woods or water, man. Woods or water.

Nick: There you go. There you go.

Mark: You’ll get it with that. All right. Well, let’s get into our show this week. As I mentioned the last time, we talked about the SECURE Act on our previous podcast. If you haven’t subscribed to the show, please do so on Apple, Google or Spotify or whatever platform of choice you’d like. We’re all over the place with those. We talked about the increase to the RMD age limit and also the contributions for IRAs with the new SECURE Act. The SECURE Act, as I mentioned before, for those of you who’d just be catching this, that is the most significant piece of legislation the government has passed for our listening audience since really the Pension Protection Act of ’06. The SECURE Act is setting every community up for Retirement Enhancement Act.

Mark: This was $1.4 trillion budget piece that they kind of snuck it into at the end of December there last year in 2019. This week we’re going to talk about a really big component, Nick, and that is the elimination or the altering of what was termed the stretch IRA. Really a lot of people they’re saying this is the big negative to this piece of its great for the government because is basically a tax generating… This is the way to create more tax income for the government, but not so great for folks who planned on using this as a generational tool, which is primarily what it was done for to leave wealth to their heirs.

Nick: Yeah, absolutely. It’s going to have a pretty significant ripple effect from the standpoint of people that were planning to leave their IRAs or maybe had adjusted the way that they were taking from their investments throughout retirement and trying to preserve the IRA to pass. That’s going to have a pretty significant impact on that. Plus it’s also going to probably cost some people some money in legal fees as they adapt and adjust their estate plans and legal documents to take these sorts of things into account.

Mark: Yeah, absolutely. What was the stretch or kind of give us a quick overview and then what they’ve done to alter it?

Nick: Yeah. One of the things I always kind of tell people is from the standpoint of a stretch IRA is that it’s really kind of a nickname and it’s a concept. A joke that I would kind of make is if somebody passed away and you had inherited funds that were in an IRA and you walk into the bank and you tell the bank teller that you want a stretch IRA, they may look at you cross-eyed. It’s not an actual legal name for an account type. The real kind of legal name for the account type is an IRA BDA or a beneficiary designated IRA. Essentially what happens is if you inherit IRA funds or you’re listed as a beneficiary on an IRA, there are kind of two classifications for how they look at or at least that’s kind of been the rule up to now where it’s either spouse or non spouse.

Nick: The way that it would work is that if you were to inherit an IRA from a spouse, you could either put those funds into your own IRA, or you could put it into the beneficiary designated IRA. The rules for withdrawals would kind of dovetail from there. For a non spouse, you would also open it as a beneficiary designated IRA. But then the required minimum distributions that would have to be taken from that account would be based upon multiple factors, including your age, the year at which the person passed whether or not they had started taking distributions already, et cetera, et cetera. There are some different rules that went on with that, but in theory you could really stretch that over your entire lifetime by taking the minimum out, and you could also list a beneficiary yourself on the account.

Mark: The reason for doing that was to if it was a larger account for tax purposes, right?

Nick: Absolutely. Let the account continue to compound, avoid taking out in a lump sum and having to pay taxes on the entire lump sum amount. Because just as a reminder for people, when you inherited a traditional IRA or traditional IRA funds, the full account balance has… Taxes are due, federal taxes. If you live in a state where you pay state income taxes, income taxes are due on that full amount. That could be a pretty significant kind of tax bomb dependent upon what happened, especially if you made a mistake in how you had to take it out. Really this new provision essentially applies to people that are going to inherit these funds starting on January 1st of 2020 moving forward. It is not a retroactive rule. Essentially what it does is it says that you must deplete that account within 10 years.

Nick: From what I’ve seen so far, correct me if I’m wrong, the rules on how you need to take out distributions within those 10 years are not as strict as they used to be. However, that account needs to be depleted within the 10 years.

Mark: Right. Yeah. You can do it over like annually obviously, but at the end of 10 years, whatever’s left, you got to pull it out and pay the taxes.

Nick: But you can defer within those 10 years as well.

Mark: Yes.

Nick: Again, that could create a pretty big tax bond dependent upon the size of the account. There’s a little bit of a flexibility and a little less accounting or paperwork on trying to track those required minimum distributions that would have to come out and the amount on are you doing it correctly, are you calculating it correctly, or some people most likely, and we haven’t gotten into it yet with any clients with it being so early in the year, but my assumption is dependent upon the overall situation, people are going to probably take it out equally over the 10 years or try to defer and be a little bit strategic with how they take it out dependent upon maybe there’s an impending retirement. Maybe a husband and wife are 60 years old and they both plan on retiring at 65.

Nick: Wife’s father passes away, leaves them money in the inherited IRA. Our goal is going to be that we’re going to take it out post retirement where the income has come down, try to minimize the taxation, and maybe even let that fill in the income hole that they have between 65 and 70 or even 65 and 72 now that the RMD age for their own accounts has bumped up to 72, and they can let their own account kind of accumulate and grow and defer accordingly. It will definitely add another level of strategy and just kind of thinking outside the box a little bit so that we don’t have to deal with that, but it’s going to be interesting to kind of adjust and adapt to the new rules.

Mark: Oh yeah, for sure. Now, for some of those folks listening who are thinking about this now, I do know there are definitely some exceptions I guess if you will, if you want to call them that. There are definitely some pieces to ponder when it comes to some exceptions I guess if you will. Obviously if you’re a spouse, that kind of stays the same. This is really kind of targeting the heirs, so like basically if you were leaving this to your kids, but there are also a couple of exceptions there like chronic illness I think is one. There’s a couple of others as well.

Nick: Yeah, chronic illness is definitely one. If there’s a disability, that changes and adds a different set of rules. Those sorts of kind of deeper details are the things or the aspects of the new legislation that everybody’s kind of digging through. The attorneys are kind of reading through all the paperwork to make that everybody has a really good grasp and understanding of what those exceptions are and how those funds can be used. Attorneys typically do a good job of interpreting the new rules and laws and coming up with new strategies that allow us to work around them a little bit.

Mark: Yeah, no, that’s a great point. That’s why it’s really important to talk with your advisor about how this may affect you if you are planning on leaving. A lot of people do that. Some people are saying, Nick, with the way this whole SECURE Act is working together with the increase to the RMD limit at 72, age of 72, and then with this, a lot of folks, they’re kind of looking at it saying it’s a tax grab for the government, which of course, I mean, it’s always something, but it’s one of those deals where if you’re living longer and you’re putting more money and you don’t have to take it out and you choose to leave it to your heirs, like these IRAs or whatever, then that’s kind of where this is coming from.

Mark: That’s kind of how the two pieces of the puzzle in some people’s minds are working together in order to generate more tax revenue for the government. It’s certainly a piece where you want to talk with your advisor about how you can now be planning more efficiently.

Nick: Yeah. As an example with that, just kind of a thinking outside the box and how people may adjust and those sorts of things, if there are substantial funds in the IRA and it’s important to you to try to leave money to your beneficiaries, this change in the law may kind of push people to look a little bit more at using a tool like a permanent life insurance policy where they’re going to use their own distributions that they’re taking from their IRA in retirement, apply some of those distributions towards a life insurance policy that is going to pay out tax free after they pass on and avoid that potential tax bomb that the IRA would leave.

Mark: Got you.

Nick: There’s different things. The fun part, and we can put that in quotes as far as the fun part, but the part that we enjoy the most as far as financial planning and retirement planning, et cetera, is that people are different. There are enough rules, laws, product strategies, et cetera, that there’s usually something for everybody. It’s just important for us to kind of get to know them, figure out what’s most important to them, and adapt and adjust the strategies that we recommend so that it fits within their life and what they’re trying to do. This is just another change that we take it into account. We adapt. We adjust. One of the things that we always preface, and this is a really good example of why is…

Nick: In these classes that we teach, one of the most common questions that people will ask us is, should I contribute money to a traditional IRA or a traditional 401k or Roth IRA or Roth 401k? They start to understand by the end of the class together that we say it depends for a reason, things change. The only thing that we know for certain is that things will change. This is a great example. We always emphasize building in the ability to be flexible and adapt to whatever changes we do have happen to us so that we aren’t all in on one certain strategy that we have no control over whether or not it changes. This is just a perfect example, and it emphasizes even more that it’s important to have multiple sources of income in retirement, multiple account types.

Nick: That goes for the funds that you’re going to use in retirement, as well as the funds that you want to leave in retirement.

Mark: Got you. Got you. Okay. That’s why we kind of preached that on the show that anytime you hear anything, whether it’s our podcast, somebody else’s, a different show, a radio show, a television show, you may be hearing some information that kind of peaks up your ears there and kind of gets you to thinking about something. But before you take any action, you should always check out what’s going to affect your specific situation by talking with a qualified professional financial advisor like the team at PFG Private Wealth, John and Nick here on the podcast. As always, we’re going to sign off this week. Really good information here on the show.

Mark: If you’ve got questions about how the stretch IRA, the removal of that or the changes to that are going to affect you or how the SECURE Act in general is going to affect you, make sure you talk with your advisor or reach out to John and Nick at (813) 286-7776 here in the Tampa Bay area, (813)-286-7776. You can also find this online and subscribe to the podcast via the website pfgprivatewealth.com. That’s pfgprivatewealth.com. You can subscribe on Apple, Google, Spotify, iHeart, Stitcher, whatever platform it is that you choose. Nick, my friend, thanks so much for your time this week. I appreciate you. We’ll talk more I’m sure about the other components of the SECURE Act and how it’s going to affect things in the weeks to come.

Nick: Thanks, Mark. Have a good day.

Mark: You do the same, and we’ll see you next time right here on Retirement Planning Redefined.

***Image credit: Trainer Academy

Ep 12: Secure Act Changes – RMD

On This Episode

After it simmered in Congress for a year, the SECURE Act is now law. If you have a retirement account of any kind, or will one day inherit a retirement account, this will affect you. Today Nick will discuss the details around the new age specifications.

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Disclaimer:

PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:

Speaker 1: Hey everybody, welcome into another edition of Retirement Planning Redefined. Into 2020 with our first podcast of the new year, joined this week with just Nick on the show with me. Nick McDevitt joining me here from PFG Private Wealth. Nick, buddy, what’s going on? How are you?


Nick M.: Just recovering from the holidays and getting ramped up for the new year.


Speaker 1: Yeah, aren’t we all? It’s so weird. Are you used to 2020 yet? I don’t know, it’s a weird number to me.


Nick M.: It is weird. Honestly, I was having this conversation with somebody the other day and the craziest thing to me is, with the age that I am, my grandparents were born in the early 30s, late 20s and it takes me back to thinking about in grade school, learning about The Great Depression and realizing that, that was 100 years ago almost.


Speaker 1: Yeah.


Nick M.: World War I and how far back, growing up in the 90s, how far back the 20s seemed and now here we are again.
Speaker 1: Yeah. Well, to that point, I’m a little older than you is, my dad was born in ’32. Actually my grandfather was born in 1890, go get that. And here it is 2020, so that just totally trips me out. My family had this weird and I’m only 50. But my family had this weird tradition of having, well, they had a lot of kids back in the day, but then they also had them late. My dad was 40 when I was born and so on and so forth. So yeah, maybe that’s why, my wife’s grandfather was born at the same time my dad was, and it’s just really weird how different people’s family dynamics work.


Speaker 1: But to that point, 2020 is bringing us a lot of change obviously and we’re going to spend probably, we’re going to the next two podcasts around this topic, but obviously we’re going to have an election later this year. The market popped 29,000, the DOW did for the first time, actually I think has done it twice now. It went over and then went back down at the time of this podcast taping, here in the early couple of weeks of January. So we’ll see. It didn’t drop very much, but it’s gone over and down. So that’s new records and new things happening, a lot of stuff.


Speaker 1: But out of all of that, one thing that really affects our listener base here for retirees and pre-retirees is the passing of The Secure Act. We talked about it months ago that it was sitting before the house and it looked like it was dead, The Secure Act. But then all of a sudden in December, there at the end, they slipped it through with some budget stuff. So let’s talk a little about The Secure Act this week, shall we?


Nick M.: Yeah, yeah. For sure. I was pretty surprised that it pushed through as quickly as it did. I had some clients that touched base towards the end of the year. And I told them what I always tell everybody from the standpoint of once it’s passed and it’s done, then we can talk about it.


Speaker 1: Yeah.


Nick M.: Because there’s always little adjustments and amendments and things like that, that are made. But a lot of the key aspects carried through. And so we’re still pouring through the details or really getting into the nitty gritty. But we figured today, we could at least cover one of the topics.


Speaker 1: Yep, sure.


Nick M.: And focus on that.


Speaker 1: Yeah, we’re going to do that with this week’s podcast and next week. We’re going to cover the two biggest components that it pertains to a lot. There’s multiple facets to The Secure Act and like any piece of legislation, there’s good and there’s bad. And of course, the government had to give it this name, secure. So for folks who are wondering, it actually is an acronym, it’s setting every community up for retirement enhancement. So that’s a mouthful.


Nick M.: Yeah, I always wonder how many people got in a room to try to figure out those sorts of things and how long it took them.


Speaker 1: How much money they spend just coming up with a name.


Nick M.: Yes, yes. And it actually takes away, fortunately, as you alluded to, the biggest aspect of this is changing the age at which required minimum distributions are required.


Speaker 1: Let’s get into it.


Nick M.: From 70 and a half, to 72 years old.


Speaker 1: Yeah.


Nick M.: Which ruins one of my favorite jokes about, again, the previous rule was so confusing to so many people and so absurd to make it a half a year and people trying to figure that out. We’re constantly befuddled, so now this is pretty cut and dry and pretty easy for people to understand, which I think it is probably a bigger benefit even than the increase of age.


Speaker 1: Well, okay, so let’s dive into that a little bit. So they did raise the RMD limit to 72, as Nick just mentioned. That’s the required minimum distribution, was 70 and a half. Now we should say Nick, to clarify, that if you have already started your RMDs at that 70 and a half threshold, it’s not like grandfathering but you have to stick with that. So make sure you are talking with your advisor about that. You don’t get to switch.


Nick M.: Correct, yes. So if you turn 70 and a half before 01/01/2020, then you are-


Speaker 1: On the old system, yeah.


Nick M.: So it’s everybody from 2020 moving forward, which again is a positive. A lot of people are working longer. And for those that don’t need the full distribution, defer income to live on, it helps them accumulate and grow money for a longer period of time.


Speaker 1: Right.


Nick M.: We’re definitely a big fan of the change.


Speaker 1: Yeah. And I think it needed to be done. I think from that standpoint, it’s good and it does clear up that confusion piece, but we just have to get through this initial weirdness, right, for folks who maybe just turned or are just planning at the end of last year, that kind of thing. So there may be a few areas where you want to try to have that conversation with your advisor about where you fall in that. So it’s certainly a piece you want to ask.


Speaker 1: So as you’re listening to this podcast, if you are new to our podcast and you’re not working with John and Nick yet, make sure you reach out to them. If you’re working with another advisor, ask them that same question, how it’s going to affect you because you still don’t want to get hit with that God awful penalty that the RMDs have, which is 50%.


Nick M.: Correct. Yeah. So just as a reminder for everybody, when those required minimum distributions are calculated. And from my understanding, again, we’re digging through all the language, the actual tables that are used to calculate the amount of money that has to come out, those tables themselves haven’t changed. So it’s just the time that you can wait as a little bit longer.


Speaker 1: Right.


Nick M.: And as a reminder to everybody, as an example, let’s say that the required amount needed to come out as $50,000. And for the last three years you’ve been taking out $2,000 a month from your account or $24,000, the penalty would be the difference between the amount due, which is 50, minus the 24,000 so 26,000. It’s 50% of that $26,000 so it’d be a $13,000 penalty, which is absolutely not a penalty that you want to participate in.


Speaker 1: No, that’s like a death sentence and it’s just terrible. I mean, so they don’t mess around when it comes to making sure you do that. Now this piece of legislation, by the way, The Secure Act, folks, it’s the most significant change since the 2006 Pension Protection Act that has come through. And there’s like I said, there’s a lot of components. We’re just going to talk a little bit about the age limit today. And along with that line, Nick, they also did eliminate age limits for contributions. So tell us a little bit about that.


Nick M.: Correct. So previously, if somebody had a traditional IRA and they were continuing to work, so as a reminder for everybody, if you want to be able to contribute to a retirement account, you must have earned income. So for those people that were maybe, let’s say, one of the things that we’ll see a lot is, to keep themselves busy, people would work a part-time job, so they would have earned income. And they were over 70 and a half and they weren’t necessarily working for the income. Of course, some are. But for example, even if you weren’t, if you were over seventy and a half, you could not contribute that money into a traditional IRA, even though you had the earned income.


Nick M.: So that rule or that restriction has been lifted. So it allows people that are working longer, which is much more common than it used to be, to be able to add money to the traditional IRA and dependent upon other factors, to potentially deduct that. So that’s a nice bonus because the other thing that happened is, because even if you were working in and this is how some of these two tie together. Let’s say you’re 71 and you were still working and you had IRA money and 401k money. Previously you would’ve had to take your RMD out of the IRA, although you could defer or wait on the money that was in the 401k for a business owner. So now that extra year and a half buffer, it can really, on some situations, it can really have a significant impact for some people on avoiding having to pay as much in taxes.


Speaker 1: Yeah. And it really also expands the opportunities for backdoor Roth conversions, as well for older clients, so that’s nice as well.


Nick M.: Yes, absolutely. And for those of you whose ears perked up a little bit on the Roth conversion, there’s a lot of caveats and we’re actually going to have a podcast in the future that talks specifically about those. There’s some hoops that you have to jump through, but that can be a really good tool to be able to use to produce some Roth money.


Speaker 1: Exactly. So yeah, make sure you subscribe to the podcast. That’s a great segue for me to mention that. We are going to talk next time about the stretch IRA and what happened to it in The Secure Act. So by subscribing to the podcast, you’ll get notifications for new episodes and really that’s pretty much it. So it’s a pretty easy thing to do. We just let you know about new episodes. You can listen to past episodes and you can find it a couple of ways. Whether Apple or Google or Spotify or whatever is your platform of choice, you can simply search on their a window, like if you’re on Spotify and hit search. You could certainly just type in retirement planning redefined and get us that way or Apple or whatever platform you choose.


Speaker 1: You can also go to the guy’s website@pfgprivatewealth.com. John and Nick have got the site there for their service, for their company. And while you’re there, there’s the podcast page. You can check that out. So that is pfgprivatewealth.com. That’s pfgprivatewealth.com and you can also call them. As we mentioned before, it’s very important. There’s a lot of changes, a lot of components to The Secure Act. We’re just going to cover over the next couple of episodes what’s going to affect most of our listening audience, but there are a lot of little pieces, so you want to make sure you’re having a conversation with your advisor and about the planning opportunities that may arise from these changes in The Secure Act law.


Speaker 1: Call John or Nick, give them a ring at the office there, if you need to talk with them. (813) 286-7776 in the Tampa Bay area, (813) 286 7776. Anything you can think of extra this week about the RMD component or shall we say goodbye for this week and hit it up next week?


Nick M.: I think we’re good to go.

Speaker 1: With that, we’ll say goodbye for this week on the podcast. So again, talk to your advisor about the RMD age limit change with The Secure Act. Reach out to John and Nick if you need a second opinion and we’ll catch you next time here on Retirement Planning Redefined.