January 2023

The SECURE 2.0 Act is now law. It is the second version of the Setting Every Community Up for Retirement Enhancement Act of 2019, known as the SECURE Act, which was signed into law in 2019 to strengthen the retirement system—and Americans' financial readiness for retirement. Same as the SECURE Act, the essence of the SECURE 2.0 Act is to increase access to tax-advantaged accounts and prevent older Americans from outliving their assets and let them save more and stay invested longer. Under the SECURE 2.0 Act, the highlights include increasing the age at which retirees must begin taking required minimum distributions (RMDs) from IRA and 401(k) accounts from age 72 to age 73 in 2023 to age 75 in 2033, and increasing the size of catch-up contributions for older workers with workplace plans to 150% of existing catch-up contribution amounts. Additional provisions include enabling employer matching contributions for student loan payments, enabling workers to save for emergencies within retirement accounts, and encouraging small businesses to offer new retirement plans at work by providing more credits. In other words, the government wants us to save more for our retirement instead of depending on its entitlements.

Full story: Vanguard

We are an advocate of having money in our pocket and investing it as long as we can. If you usually get tax refunds , you may want to change that habit. Some argue that they rather have the IRS to keep the funds otherwise they would spend it. As such, they are forced to save. We strongly disagree with that because most will spend the tax refund when they receive it. The good news is that this habit can easily be changed.

We believe the first step to achieve financial independence and freedom is to be responsible for our spending and be disciplined to set up a plan to save and invest.

Instead of having the IRS holding your excess taxes for the year and waiting for refunding overpaid taxes to you without getting any interests or returns, we suggest adjusting the tax withholding information to reflect your accurate information to avoid either overpaid or underpaid taxes. With less tax withholding, you are able to save more from every payroll in your retirement plans with which you can also get tax deductions.

Full story: The Wall Street Journal

Pre-election year

While one camp is painting a dire picture in the market this year, another camp does not think it may not be that bad because of the historical election year market cycle. This year is the pre-election year. Historically, the stock market will do relatively well during the pre-election year after the midterm election.

We do not know whether the stock market this year will follow the election year pattern. What we already do know is that the major indices have dropped over 20% and 30%, not to mention some individual stocks have been cut in half or so. And when others fear buying, it would be a good time to invest. Having an investment plan of what and when to invest to make your money work for you will definitely help you capture the buying opportunities ahead of us.

Full story: The New York Times

After spending time with your loved ones during the holiday, many start setting up or reviewing their estate plans to protect their loved ones. Naming beneficiaries will be the first and crucial step to determine who gets what according to your wishes. It is advisable to review beneficiary designations once a year. Many assets pass by beneficiary designation, not by your will or trust, such as retirement plans and life insurance policies. You may have questions about, “Can I designate my children as primary benefits for my 401(k) plan account?, or “Should I appoint my trust as my beneficiaries?”. It will get more complicated especially when you have a more complex financial situation. Consult your financial advisor or estate planning attorney for guidance and ensure you are in control of your assets.

Full story: Kiplinger