The Secure Act is now law. And like many other laws with neat-sounding, wholesome-as-apple-pie acronyms, remember the “Affordable Care Act” or the “Pension Protection Act” or the “Patriot Act” etc, the Secure Act will do nothing it promises.
Apparently, the elites in D.C. believe the reason we have a “Retirement Crisis” is that Americans don’t have enough access to retirement accounts. This is so silly it’s painful for me to even have to argue this. But here goes:
Only 8% of eligible Americans contribute to an IRA of ANY KIND according to Motley Fool’s look at IRS stats! Now let’s say a bunch of those people who don’t contribute don’t do so because they’re retired, they’re fully maxing out their employer plans, etc. That still leaves a whole lot of people who don’t contribute to IRAs and this is not because of a lack of access. Simply type in “Open an IRA” in Google and you will see there are ads on top of ads in the Search Engine Results Page (SERP).
In fact, if you go to Neil Patel’s UberSuggest you will see that keyword phrase has a cost-per-click (CPC) of nearly $20! That means it costs advertisers nearly $20 for every time someone clicks on their ad.
Now, type in “Social Security” in UberSuggest and you will see the CPC is all of $.35. Advertisers are willing to pay only 35 cents for a click, even though Social Security is one of the biggest financial keywords in the country.
For fun, type in “buy diapers”. Purchasing diapers online, believe it or not, has a huge contingency of buyers and thus firms competing for sales. That keyword phrase only yields a CPC of $3.14.
What does this tell you? Companies are desperate, DESPERATE!, for you to open an IRA. So desperate, in fact, they’ll pay huge fees to advertise their firm in Google and many, many other places.
Yet, somehow we hear ‘lack of access’ is what’s driving the “retirement crisis”. Just silly.
Secondly, we need the Secure Act because we are told the “Retirement Crisis” is due to people no longer having defined benefit plans, aka pensions, anymore. As such, we are left to fend for ourselves with our retirement assets. Oh no! How could grown people possibly know what to do with their own money! We need to hire The Professionals to manage our assets for us!
Yeah, no thanks. The Professionals track record is FAR from superior to the average Jane or Joe out there. As Bill Buckley used to say, he’d rather be governed from the first 200 people in the Boston phonebook than all the PhDs at Harvard. Indeed. Professional money management is certainly a great way to enrich the elite class at our expense.
Oh, the doomsdayers will also say that without pensions we are not only at the mercy of our own inability to manage our own money but of market volatility too. And, of course, the market can go crazy. We’ve seen it, time and again.
So, what’s the solution? Annuities of course! Since few of us have pensions anymore, the annuity is the next best thing. Amirite? Or amirite? And who benefits most from annuities being offered to employees in retirement plans? Insurance companies of course! It’s like Ned Reyerson was able to convince Congress to give him access to more unsuspecting employees with his insurance pitch. I can’t wait to watch this “fix” in action.
Those are the benefits of the Secure Act; Increasing access and more professional management via insurance products.
Wow. And to hear the media tout this new law you’d think there were major improvements. Now that’s funny.
Oh, I hear you asking “But Josh, what about the increased age until RMDs are required? That’s a great thing, no?”
BWHAHAHA, have you not been paying attention, my tax-paying friend? We want you to REDUCE your tax-deferred accounts as quickly as you feasibly can, not delay that! The longer you wait, the MORE you’ll end up paying to the IRS. For one thing, you’ll have MORE, most likely, in which to withdraw.
Secondly, that increased RMD amount can throw your Social Security payments into a taxable situation.
Thirdly, the more distributions you have from your IRAs the higher, potentially, your tax bracket could be, which could force not only Social Security to be taxable, but also your Long Term Capital Gains AND your Qualified Dividends. (Man, if only someone wrote a book on this!)
Fourthly, Heaven forbid you’re married and leave your surviving spouse a widow(er) with a large IRA balance. Whooowweeee, the IRS is gonna love you!
Oh, and lastly, now the Secure Act removed the Stretch IRA, you certainly will do your kids no favors by leaving them IRA balances that you hoped they’d pay minimal taxes on. No such luck. They MUST withdraw those accounts in the entirety within 10 years of receipt. And we lucked out there as the Senate bill was for five years! Let’s take our blessings when we can get them, I suppose.
And there, in a nutshell, my friends is the Secure Act.
Great for Insurance Companies. Great for the IRS. Not great for everyone else. Just goes to show the power of the Lobbyists.