Broker Check

Quarterly Newsletter 06/30/2023

       Is it possible to have your cake and eat it, too? Well, as a result of Congress passing the Secure Act 2.0 in 2022, the answer is YES! This letter will explain two new ideas that resulted from this legislation. One idea will be for our clients aged 50 and younger and the other idea will be for our clients aged 70 and older. If you are between the ages of 50-70, you don’t have to pay attention. Just kidding! If you’re in this age bracket, you may have kids or parents that these ideas will benefit, so PAY ATTENTION!


      Let’s start off with our younger crew. The Secure Act 2.0 made some very important changes to the College 529 Savings plan. One of the biggest problems with the plans was what do you do with the money if the child, for whatever reason, did not use it all. The law now says, starting in 2024, any unused College 529 Savings Plan funds can be converted to a Roth IRA for the beneficiary if the following rules have been met. The account has to have been open for at least 15 years. The maximum annual conversion amount must match the maximum annual Roth contribution amount for that year. As an example, for 2023, the maximum contribution amount to a Roth IRA is $6,500 ($7,500 if over 50). So, if you were doing this 529 to Roth IRA conversion, you would be limited to converting $6,500/$7,500 per year. Also, there is a maximum lifetime conversion amount of $35,000. Lastly, the Roth IRA owner needs to have includable compensation at least equal to the amount of the rollover. So, one idea we have for our clients under age 50 is to set up a college 529 savings account for yourself knowing the money will not actually be used for college. Then, convert the 529 account to a Roth after 15 years. This becomes a back door Roth IRA contribution. Now this is just an overview of an idea that may or may not work for you. Make sure and reach out to a tax professional before instituting this.


       Alright 70+er’s is your turn. Thanks for being patient. As you know, the rules used to say when you reached over the age of 70.5 you were required to make a taxable distribution from your IRA called an RMD (required minimum distribution). The age has subsequently bumped up to age 73 (for 2023), but what didn’t bump up was the age you can make a Qualified Charitable Donation (QCD). A QCD is a distribution from your IRA sent directly to the charity/charities of your choice up to a maximum of $100K. By doing this, the distribution never flows onto your tax return; therefore, you do not have to pay any tax on it. The Secure Act 2.0 made one significant change to the QCD rules. A QCD can now be used to fund a Charitable Gift Annuity (CGA). A CGA is a charitable giving vehicle that allows someone to make a charitable gift from their IRA and create an income stream for themselves or someone else. Whatever is left after death goes to the charity. There are some limitations to be cautious of:

  • The gift has an aggregate lifetime limit of $50K per person.
  • Income beneficiaries of the gift and limited to the donor and their spouse only.
  • All distributions from the CGA will be taxed as income.
  • Payments from the CGA must begin within one year.
  • The CGA cannot accept gifts of other assets (cash only).
  • The charity has to offer a CGA option.


       So, there you go. A couple of golden nuggets found within some very complex legislation. As always, if you’d like any further information on either of these topics, please give the office a call and we can discuss them in more detail.


       As far as the market is concerned, we have had a heck of a run so far this year. S&P is up 15.84%* and NASDAQ is up 38.4%**. That’s pretty good. My crystal ball says things should flatten out or go slightly down after a run like this, but who knows. Long-term interest rates are starting to creep up as well, which typically puts a lid on stock market performance.


       I hope you are all feeling well. As always, we thank you so much for partnering with us on your financial journey and we look forward to guiding you and your families for generations to come.    

The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC.