News & INSIGHTS

Pat’s Planning Post

Secure Act 2.0

As you may have heard, Congress passed the ‘Secure Act 2.0’ in the final week of December 2022.

There are a ton of takeaways from the lengthy bill, and many of them are positive for the retirement savings landscape. Here’s one in particular that stands out as a great planning opportunity:

Beginning in 2024, some individuals will have the ability to move 529 plan account money directly into a Roth IRA! However, there are a number of conditions to satisfy for the transfer to be valid:

• The Roth IRA receiving the funds must be in the same name of the beneficiary of the 529 plan
• The 529 plan must have been maintained for 15 years or longer
• Contributions to the 529 plan within the last 5 years are ineligible to be moved to a Roth IRA
• The annual limit for how much can be moved from a 529 to Roth IRA is the IRA contribution limit for that year
• The maximum amount that can be moved from a 529 to a Roth IRA during an individual’s lifetime is $35,000

We are hopeful that lifetime limit increases over time. However, in the meantime for those who recently welcomed a newborn to their family – parents and grandparents alike may have an opportunity to ‘overfund’ a 529 plan in order to save for college AND setup an incredibly tax-advantaged retirement savings fund for that beneficiary.

Liebmans’ Library

In this section, which we call Liebman’s Library, Matt Liebman and Sam Liebman will share 1-2 articles or charts per month that caught their attention related to the Investment Markets.

When Matt was in Elementary school, he would walk into his room and find newspaper or magazine articles about sports, politics, business, or markets that Sam had cut out for Matt to read. The tradition has continued for over 30 years.

For this month, we chose an article from December highlighting the dismal year corporate bonds had in 2022. As we mentioned last month, those who have known our firm and investment philosophy over the years have likely heard us use the term “Reversion to the Mean.” Again, while there are more elaborate or technical definitions of this phenomenon, we think of reversion to the mean, from an investment perspective, as the concept that investments – particularly broad asset classes – tend not to move in the same direction forever. Eventually, asset classes or segments that underperformed will often outperform and vice versa. While negative recent performance is not alone a reason to buy a security or asset class, we do view 2022’s weakness in corporate bonds as more an opportunity to look for good values rather than a cause for alarm.

Aaron’s Action Items

Make an Investments Savings Goal for 2023 – OUTSIDE of Your 401k

It is important to set investment savings goals, in my opinion. And not just saving cash that will ultimately be spent, or money that is being contributed to a 401k, but to an investment account that you don’t plan on touching for a long time. Think of it as a one-way street. Money is going in, and not coming out for years or (hopefully) even decades.

After setting your yearly goal, a good way to accomplish the actual saving is to set up an automatic monthly contribution directly from a bank account into an investment account. If you receive periodic commissions, bonuses, business distributions, etc., commit to saving a certain percentage of that as well.

Don’t just assume that you will manually save throughout the year as your checking/savings accounts build. Money that sits in those types of accounts generally gets spent throughout the course of daily living. Set your goal in advance and commit to sending your cash down that “one-way street” to future growth potential.