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SECURE Act 2026: What Retirees Need to Know About RMDs, Roths, and Taxes · Retire and Thrive

• 0:00
  Welcome back to another edition of Retire and Thrive, where we
• 0:03
  help you build your life with purpose, wealth, and confidence.
• 0:07
  Welcome back, Cody. That's good to be back.
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  I'm getting excited. Yeah, today I thought we would
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  talk, maybe just get a little bit more granular.
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  And I want to try to keep this fairly surface level because I,
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  I think it's, I don't want to use the word boring, but it's
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  not as maybe quite as exciting about specific examples of, of
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  clients, but I think it's very important.
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  And that is the secure act. So again, I'm just kind of
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  feeding you, throwing questions at you.
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  Sometimes I come at this a little bit more random, but you
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  know, we see in the headlines, you know, there's been changes
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  in 2026 to the secure act. But why don't you take us back a
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  little bit and tell us a little bit about what is the secure
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  act? And is this something that, you
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  know, where's it come from? And has there been changes?
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  Just give us kind of a background.
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  Well, First off, I can't believe you think it's boring.
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  I mean, this stuff is awesome and it's just the conversation
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  is thrilling. But in reality, we're not, we're
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  not Cpas, we're not accountants. We're not going to know this
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  stuff like the back of our hand, which they obviously do.
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  And, and you can run any sort of questions through your
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  accountant in CPA because we want to make sure they're 100%
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  accurate before doing any sort of recommendation.
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  But secure Act, it's, it's a common term that's thrown around
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  over the last six years, quite frankly, because as you said,
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  when did it start? The secure Act came out one
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  point O, in January of 2022. So I guess we're talking four
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  years ago actually is when it started.
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  But there were some changes and, and one of the big ones that
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  people constantly go back to is when are you, when are you
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  forced to take money from your IRA accounts, right.
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  So what's commonly called is the required minimum distribution
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  age. Previously and for a very, very
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  long time, it's been 70 1/2. That's kind of the age that was
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  set up where if you haven't taken money from A-401-KA403B,
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  an IRA list of other ones, you have to take a portion of it.
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  Well, the IRS says we'll actually kick that back for you.
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  So it used to be 70 1/2 and now it's from the security 1.0, it
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  was 72. So you got another year and a
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  half to defer it. And so that was one of the main
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  changes. And then there's some special
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  catch up provisions as well. But there's a, there's a benefit
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  to deferring that on your your income and deferring that as
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  income in the future. But it can also be a little bit
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  of a trap. Because we talked about that
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  last week. I was just going to say that was
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  one of the traps you were referring to.
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  And again, another revision to the SECURE Act, which we'll
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  touch on, but it also pushed it back again.
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  And so people again get there, you know, they get excited and
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  they say they don't have to pay tax, but in reality it's, well,
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  the government's doing it so that they get a bigger tax bill
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  likely at the at the end of the day.
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  So that's one of the major ones. And another big one in 2022 on
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  the SECURE Act is how the money's inherited on the IRA
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  side. You used to be able to stretch a
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  beneficiary IRA out over your entire lifetime, meaning, God
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  forbid if something happened to mom and dad, you receive money
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  in an IRA, you can stretch it out over your lifetime.
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  That changed in 2022. Now, if you receive money from
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  your parents and it's in an IRA, you got 10 years to take that
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  money out and you got to record it as income.
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  Yeah, that can be a lot of money in those given 10 years that you
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  pull money out. It feels like anytime there's
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  changes, there's always an angle that the government's going to
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  get your money faster. So when you just refer to that,
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  because I do know I've been in the business obviously a long
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  time, and when you talk about those stretch Iras, you never
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  hear that phrase anymore. But that's exactly what it was.
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  If I inherited money and I'm 40 years old, I can stretch that
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  out over my lifetime. In other words, I need to pull
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  out a certain amount every single year.
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  Might be a very small amount if I'm 45 or 50 years old, but
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  you're right, I could stretch that out over my lifetime.
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  And as you alluded to, now you've got 10 years to exhaust
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  it. So I mean, just imagine if I'm
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  55 years old and one of my parents passes away and leaves
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  me a million, million and a half, I got 10.
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  I mean, that changes everything. And that probably goes back to
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  one of the things you were referring to in terms of the
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  Roth conversions last week when you talked about the tax trap
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  too. Absolutely.
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  And that 10 years is a short window.
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  Now if you list a trust as a beneficiary on an IRA, that
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  window just got shorter and you've got five years to take
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  that money out of the trust. And trust rates are higher than
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  typically ordinary income rates. Hold on a minute.
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  You said if the trust is the beneficiary, you have to pull it
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  all out within five years. That I did not know.
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  That it shortens it very much. And again, trust rates, they,
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  they don't take long to get up very, very high.
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  So not a good strategy if you're if you're looking at benefit
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  beneficiary designations on an IRA account, tax deferred or
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  403B or 401K whatever. If it's tax deferred and you
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  have a trust listed as your primary beneficiary, you
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  probably want to start talking to an attorney or your advisor
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  to say who should I put this beneficiary as 'cause that's not
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  a great strategy if unless it's your only strategy.
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  Great advice. You know, yes, absolutely.
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  I did not know it was a five year I, I do know you climb up
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  to the the higher brackets much, much quicker, but I did not know
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  you only had five years. So that's very good to know.
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  Let's Fast forward 2026. The Roth mandate and part of the
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  SECURE Act touch on that a little bit so some of the
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  viewers understand what that Roth mandate really means.
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  Yeah. So the Roth mandate is, is
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  unique and it wasn't very vocalized.
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  It wasn't very public to a lot of people.
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  It kind of just happened in 2026.
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  I'm sure a lot of people knew about it, but I, I was kind of a
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  little bit behind the ball on it too.
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  But if you make over $150,000 in 2025 and you're, you have a
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  qualified plan at your employer and you try to Max that thing
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  out and you're putting money away and putting money away.
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  If you're over the age of 50, you can actually put additional
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  money away than what the traditional, you know, in, in
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  today's world, $23,000 contribution limit is.
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  But if you made over $150,000 and you want to contribute that
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  additional ketchup, it has to go in the Roth portion, whether you
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  want to or not. Now, the biggest stick of that
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  is guess what, if your employer doesn't have a Roth, you can't
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  contribute. And so you don't even get to
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  contribute that extra ketchup if even if you want to because your
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  employer doesn't have that Roth. Now most most plans and most
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  companies now have a Roth component, but does kind of
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  pigeonhole you if you if you were a high income earner and
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  you want to save more, you got less available.
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  So what they're really saying is we don't want you to put that
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  catch up because you're over a certain age and reduce your
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  income. We want you to put in the Roth
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  so that we can get the tax money on it.
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  And the, I don't want to offend anyone, but typically the IRS
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  is, is pretty short sighted and they want that tax revenue right
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  now. And so they say, yeah, go ahead
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  and put it in the Roth, you're going to pay tax on it today,
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  which in turn could be a very beneficial thing for some of
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  these high income earners and down the road who've saved a lot
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  where they get the tax out of the way and it's taken care of
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  now. And long term, you've got this
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  bucket of after tax money that guess what?
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  Now you can manage your tax bracket, which is one of the key
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  ingredients for a successful retirement, is just being able
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  to have control of the taxability of distributions in
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  retirement. It's interesting that they
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  pegged $150,000 because as you alluded to, those are typically
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  the people that will have the largest 401K403BS at age 6065.
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  So in essence, it's forcing them to put money into a Roth, which
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  down the road they will be thankful for.
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  Absolutely. Yeah.
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  Yep. Absolutely.
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  And I'm guessing the government didn't do it to try to incentify
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  and say, hey, high income earner, this is going to be a
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  good thing for you. They were doing it for the the
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  tax revenue today basically. Absolutely.
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  And you look at a Roth IRA outside of a qualified plan,
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  they have limits where ultimately if you make too much
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  money, you can't even contribute to a Roth IRA.
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  But now they're forcing you to do it in a qualified plan.
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  So it doesn't really make sense to me, but I think it's almost a
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  little bit of a forced feed for the employee to say, I guess I'm
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  going to have to put it in the Roth, but might not want to.
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  But you'll thank yourself later, I promise you.
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  Yeah. So, so you were talking about,
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  you know, the ketchup. Let's talk about the Super
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  ketchup. I mean, tell us about that
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  because there's been some headlines on that as well.
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  Yeah, it's it's unique and a lot of people don't know about it
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  because again, like I said, once you're 50 years old, you can
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  actually make that traditional ketchup and an additional
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  contribution to your qualified plan or even IRA accounts just
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  to kind of stack more money away right before retirement.
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  But that's at 50. The Super catch up is from age
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  60 to 63. Please don't ask me why those
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  numbers 'cause I have no idea. But it's those years that you
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  can actually do an additional catch up.
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  You can't do the traditional catch up, but you can do an
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  additional super catch up which is north of that which is over
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  $11,000 instead of the traditional which is about $7000
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  to $7500. So you get a little bit extra
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  bump for 60616263, but why not 64?
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  I don't know. But then you go back and you can
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  still use that other ketchup. But again, you got those four
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  years where you can essentially bump that up.
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  I. Don't know if I say fortunately
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  or unfortunately. I'm not quite to the Super
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  ketchup age. I'm getting close another. 20
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  years. I'm not quite there yet.
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  You know, we've never really used the word hack on this
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  podcast, but I like hacks. You know, I, I see some of this
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  stuff on social media could be like something that I can use
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  personally to for the house or whatever it might be.
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  But there is a hack that I think is incredible.
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  And and again, I don't work with a lot of clients that kind of go
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  into the details of this, but that hack is the 529 to Roth
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  hack, which if you can elaborate to get be very brief on the 529
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  because we don't really do 529 plans here.
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  Most people probably know what they are.
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  But what is the 529 to Roth hack about and how does that work?
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  I listen to your words carefully because you said be brief and
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  the the 529 is just. You don't have to be too.
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  We're just saying we want to articulate it as best as
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  possible without going into the weeds.
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  I just, I think of the 529 and it's become so much more
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  flexible. It used to be just primarily
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  post secondary schooling that you can use it for tuition, you
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  name it. But it's now a little bit more
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  widespread where you can use it for tuition for high school or
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  private schooling or whatever the case may be.
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  And you can do it for that. But one of the biggest ones, the
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  hack that you're talking about is, you know, you don't
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  typically know if your kid is going to go to college or not,
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  or if they're going to private school when they're three years
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  old. But you want to stack money away
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  when they're young because then you have more time for that to
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  grow. Now the hack you're talking
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  about is, well what if my kid doesn't go to school?
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  Or what if they don't spend all of the money?
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  Whatever the case may be, The new hack under the the new
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  legislation is if you've had this account open for 15 years,
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  which typically is going to be the case because usually you go
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  to school when you're 18 ish. If you had it open for 15 years
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  and it's not fully exhausted for school or the kid decides to go
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  somewhere else and not go to school, you can actually move a
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  portion of that balance into a Roth IRA, which is all after tax
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  money being contributed to a retirement account then for that
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  child, which they can't touch for another, you know, 20 or or
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  40 years likely in the, in that case anyways.
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  But you can just transfer it over and now it's a retirement
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  account for that, for that child and they can use it now for
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  retirement funds instead of college.
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  It's a limited amount. It's only about $35,000.
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  You can actually do but $35,000 over the next 40 years.
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  It's a big number. So there's no tax implications
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  to move it from the 529 plan over to the Roth then?
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  No, you know, that's almost like, I know when you're funding
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  or a 529 plan, there's no tax benefit to the person who's
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  donating it. But obviously the growth of it,
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  if it's used for post secondary education is, is tax free.
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  But it's almost like I'm not giving advice here.
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  But if you do over fund it, it's not the worst thing in the world
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  if you can do the 529 to Roth hack.
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  Absolutely. And, and another unique aspect
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  of it is you can't contribute to a Roth IRA unless you have
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  earned income. There's not usually many 12345
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  year olds earning an income, so you can't get money into a Roth
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  for them when they're that young.
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  But you can put money into a 529.
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  And ultimately if they decide not to go to school or whatever
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  the case, boom, you had this money that was in their account
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  from age of one or two compounding over the next 60
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  years to now become part of their retirement.
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  It's it's a nice deal. Yeah, that is nice.
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  I do want to touch on this and you can take this and and run
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  with it however you want. But again, I'm old school.
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  I've been doing this for a long time.
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  And we've touched on episode before we talked about that RMD,
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  you touched on it today, the requirement of distribution.
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  And you know, my assistant Deb, who's been with me for probably
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  15 plus years, I know every year we scramble at the end of the
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  year who hasn't taken their RMD because the penalty is so
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  severe. And it's it's to the point where
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  it does cause some anxiety mid-december about who hasn't
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  taken it, who has and part of it just because that penalty
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  penalty has been so severe. But they have modified that.
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  So touch on that if you would. Yeah, very, very hefty penalty.
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  Before the secure Act, it was 50%, right?
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  So you start talking about $1,000,000 portfolio.
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  And just to kind of get into some of the numbers, but not
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  perfectly, typically it's about 4 1/2 percent you have to take
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  from your portfolio for your first required minimum
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  distribution. If you're talking about
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  $1,000,000, that's 40 to 45,000 bucks, 50% penalty on that.
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  That's a lot of money that you have to pay if you don't take
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  it. Now, again, you don't usually
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  run into this problem. People like to take money and
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  enjoy it and use it and whatever the case may be.
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  But sometimes it happens where it's just forgotten and and they
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  don't need it. So it's just a, an issue from
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  that standpoint. But with a secure act, what they
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  did is they changed it. Instead of such a a grueling 50%
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  penalty, they dropped it to 25. Still pretty grueling.
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  I mean you you look at that $1,000,000 example, we're still
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  talking 10s. Thousands of dollars of
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  penalties if you don't do it. So the penalty is was 50% of the
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  amount you needed to pull out, now it's 25%. 25% but they gave
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  a a beautiful little hack there again saying if you pay back
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  that the OR if you take the distribution before a certain
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  period of time, we'll actually just reduce it to a 10% penalty
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  instead of 25, which again is still a lot of money.
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  But it's a two year window where essentially you can say, hey,
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  you know, for 2024 up until the end of 2026, I can pull my 2024
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  required minimum distribution only pay a 10% penalty, which is
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  far better than 25, let alone 50%.
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  So again, not a very common situation, but it's a benefit if
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  you did unfortunately forget and you got to go back and kind of
• 14:44
  fix some mistakes there. So the message is if you got
• 14:46
  retirement plans and you're part of that RMD, spend the money,
• 14:50
  enjoy it, don't hoard it. Is that what you're saying?
• 14:53
  Yeah, absolutely. Another new update to that too
• 14:56
  is, you know, we talked a lot about Roth conversions and
• 14:59
  saying, oh, if I don't have a goal to spend the money or if I
• 15:01
  have enough income coming in, what do I do?
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  Well, we talked a lot about Roth conversions, reposition the
• 15:07
  money. What's new now as of last year
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  is before you do a Roth conversion, if you're RMD age,
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  you have to take the required minimum distribution as a
• 15:17
  distribution before you do any Roth conversion.
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  So you can't actually use a Roth conversion as a required minimum
• 15:24
  distribution anymore, which doesn't necessarily help you as
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  much. Interesting.
• 15:27
  Yeah, we're going to wrap up this episode, but kind of like I
• 15:31
  like to do with you is the last few episodes we've shot here as
• 15:35
  it pertains to some of this. I mean, again, there's a lots of
• 15:37
  stuff we're talking about the secure Act and we're talking
• 15:38
  about all these different things with the hacks and everything
• 15:41
  else. If it's been a few years, let's
• 15:44
  say I'm 75 years old and I haven't really revisited this
• 15:46
  and I've got money in retirement accounts.
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  Is there one thing that if you were in that stage, doesn't
• 15:53
  necessarily have to be in the required minimum distribution
• 15:55
  stage, but the secure act seems to center around a lot of that.
• 15:58
  Is there one thing that you would give people advice to go
• 16:00
  back and review and look at? Or what's the one piece of
• 16:04
  advice you'd have? Yeah.
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  I don't know if it necessarily pertains to the SECURE act, but
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  I think one of the most important things if it's been a
• 16:09
  couple of years since you've really looked at the entire
• 16:11
  picture is to get back with your team, whether it be your CPA,
• 16:14
  your advisor, your attorney or all of them collectively and say
• 16:16
  where are we at now? Because again, these laws change
• 16:19
  from year to year to year to year.
• 16:21
  And and another huge benefit in 2025 and 26 is the enhanced
• 16:27
  senior deduction that you get to take if you're over the age of
• 16:30
  65. So that's another $12,000 of
• 16:32
  deductions that you can take and usually use that, usually use
• 16:35
  that for a Roth conversion or an IRA distribution.
• 16:38
  Can I stop you in a minute? Can you just, I know we're up
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  against time here. Can you touch on that senior
• 16:42
  deduction? Because I think that is
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  something that a lot of people are not familiar with and you
• 16:46
  just kind of rattle it off like you know it like the back of
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  your hand, which you know you can see.
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  But touch on that. I think it's worth a minute or
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  so to touch on that senior discount.
• 16:53
  Yep. So that was it actually wasn't
• 16:54
  part of the SECURE Act. It was part of the One Big
• 16:56
  Beautiful Bill Act that was enacted in 2025.
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  But when you when you file your taxes, you get a couple options.
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  You can take the standard deduction or the itemized
• 17:05
  deduction. Itemize is very, very rarely
• 17:07
  done. It used to be a lot more common,
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  but now it's about 5% of tax filers take that the standard
• 17:12
  deduction. You just get a bulk deduction
• 17:15
  you take away from your AGI and then you get your taxable
• 17:17
  income. Now this new bill or this act
• 17:21
  that just came about in 2025 said if you're over the age of
• 17:24
  65, we're actually going to give you an additional $6000 of a
• 17:29
  deduction on top of what we're already giving you and your
• 17:32
  spouse if they're over 65. So you can get an additional
• 17:34
  $12,000 of just a, a wipe of way of a wipe away of taxable income
• 17:39
  if you're over the age of 65. And it's important you use that.
• 17:42
  Above the standard deduction. Above the standard deduction.
• 17:44
  So you could have almost $50,000 of standard deduction if you're
• 17:48
  over the age of 65. Now, it's important to be able
• 17:51
  to use that deduction for your advantage and say, should I take
• 17:54
  distributions, Should I do Roth conversions?
• 17:56
  Am I in the 12% tax bracket? And I can do tax gain
• 17:59
  harvesting, which we haven't even unraveled that, but it's
• 18:02
  just a lot of things you need to do.
• 18:03
  So back to your question, if it's been a couple of years, get
• 18:06
  back with your team because these laws change very, very
• 18:09
  frequently. And that's why we like to meet
• 18:10
  with our clients annually, if not more often to say what's new
• 18:14
  on your end, but in more reality, what's what's new in
• 18:17
  the financial world that changes ever so quickly.
• 18:19
  So it it's time to get back together if it's been a couple,
• 18:23
  two or three years. Yeah, great, great advice.
• 18:25
  And again, thank you. Your wealth of knowledge on this
• 18:27
  subject is, is very interesting. And I again, I think the, the
• 18:33
  viewers are going to appreciate some of that context.
• 18:37
  And again, I think the message is really, if you're confused,
• 18:40
  you're overwhelmed, go speak to as, as Cody has pretty much
• 18:43
  mentioned on every episode, go find your team and, and update
• 18:46
  it. And I know a lot of people don't
• 18:48
  like writing out checks to their professional, you know, advisor,
• 18:51
  be an accountant, attorney, whatever.
• 18:52
  But as you said, you know, these, these senior deductions
• 18:56
  and everything else does get overwhelming.
• 18:57
  And as you mentioned, any things are changing all the time.
• 18:59
  So yeah, so thank you and thank you for tuning into another
• 19:03
  episode of Retire and Thrive, where we will continue to
• 19:06
  provide information for you that we feel is relevant and have a
• 19:10
  good rest of the week and we will be back next week with
• 19:13
  another episode. Fortress Financial Group, LLC is
• 19:16
  a registered investment advisor. Advisory services are only
• 19:19
  offered to clients or prospective clients where
• 19:21
  Fortress and its representatives are properly licensed or exempt
• 19:24
  for licensure. The opinions voiced in this
• 19:26
  material are for general information only and are not
• 19:29
  intended to provide specific advice or recommendations for
• 19:31
  any individual. All indexes are unmanaged and
• 19:34
  may not be invested directly. Investing involves risk,
• 19:37
  including loss of principal.