top of page
  • Writer's pictureBridget Sullivan Mermel CFP(R) CPA

What's NOT in SECURE Act 2.0 | What Didn't Make the Cut

What's NOT in the SECURE Act hasn't gotten much attention as everyone, including @FriendsTalkFinancialPlanning, have been focusing on explaining the changes that did make the cut. Before the SECURE 2.0 was passed, many ideas were put out there. In some cases advisors suggested taking pro-active action to avoid the negative impact of changes that ultimately haven't come to pass!

Today on Friends Talk Financial Planning we’re going talk through six main ideas that are NOT in the SECURE Act. There are items that you may have heard about that didn’t make it in the legislation and things you don’t have to worry about.

Make sure to stick around until the end for a hunch on when some of these items might change!

Here are other episodes we've filmed to explain SECURE 2.0:

SECURE 2.0 Changes starting in 2023:

529 to Roth conversions may work with guest @SeanMullaneyVideos

00:00 Welcome

01: 21 #1

03:13 #2

04:46 #3

06:20 #4

07:12 #5

08:11 #6

10:16 When these items MIGHT change

#acpmemberwisdom #financialplanning #secureact

John's firm website:

For advisors around the US:

Thanks for watching and please subscribe!


John: We've been doing several episodes on what is in the new Secure Act 2.0. Today on Friends Talk Financial Planning, we're going to talk about what's not in the new Secure Act, things that you might have heard about that have not made it in, and things you don't need to worry about. Hi, I'm John Scherer, and I run a fee-only financial planning practice in Middleton, Wisconsin.

Bridget: And I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois. And John, before we talk about the Secure Act, let's remind everybody to subscribe. It helps us grow our channel and helps more people find out about our information. So, John, let's go. There's been a lot of talk about what's in the Secure Act, but then before the Secure Act was even passed, there was a lot of bantering about what might be in it. And a lot of times people aren't clear about what made the cut and what did not make the cut.

John: There's all this white noise. When something happens, you go, “Oh my gosh, how do we separate these things out?”

Bridget: Yeah.

John: Check out some of our previous episodes where we talk about some important things that you need to know for 2023 and for the coming years. But today we have six things we want to talk about that you might have heard about that have been talked about in the press, some directly with the Secure Act, some with other tax law changes that you don't need to worry about for the foreseeable future. And the first one that I wanted to bring up is the idea of closing off the backdoor Roth, where you put money into a regular IRA and then convert it to Roth IRA.

That's a tactic that people can use in order to make a Roth IRA contribution where they might not otherwise be able to do that. There was lot of talk about that going away with various tax law changes. It was talked about with the Secure Act but that has completely fallen off the table. And there was talk in our world. We were talking before we hit record about sessions that we attended in which we questioned whether to continue with backdoor Roths because they might close us at some point in time. This was something we needed to be prepared for but now that's off the table.

Bridget: Backdoor Roth is a technique that we use a lot in our office and fee-only financial planners, I think, tend to do it more than other people in the industry because we're putting our clients’ interest ahead of our own. And it also requires a lot of paperwork, so it's a good tactic, but you have to be on top of it. And it is something that an office like ours can kind of do efficiently, whereas if you're trying to figure it out yourself, you can—the information is readily available—but it's not that easy to do. So back to Roths. That loophole is still in. And to me, the fact that they haven't closed it says that they know about it, and they haven't closed it, and so, it seems a little bit more intended, but I know we disagree on that point.

John: Well, it is interesting talking about what the intentions are. Who knows exactly what goes on when they make some of these laws? But one of the other things that has not changed is making Roth IRA conversions. And we've talked about this in the past. Check out previous episodes for this sort of Rothification of retirement plans. The things that are in the act are incentivizing towards Roth. They are not shutting down the backdoor Roth IRA, but incentivizing towards that. They are not shutting down conversions, but again, incentivizing towards that.

And when we talk about Roth conversions, what we mean is taking an IRA and then paying taxes on it and turning it into Roth IRA. You can do as much money as you want to and make that conversion. Back in the old days when Roth first came out, you could do a conversion, but there was a limit. If you had a certain amount of income, no Roth conversions. Then they changed it and said, “Oh, yeah, you can do a conversion anytime you want to, but you still can't do a contribution,” which is where that backdoor Roth thing comes in.

But they haven't shut down backdoor Roths; they haven't shut down the Roth conversions. Again, it does make some sense to think, “Okay, are they trying to incentivize Roths?” But that's been a topic of discussion in the past. Geez, can we continue to do Roth conversions and do strategic planning when it comes to getting into especially those early years of retirement? That's still on the table; you don't need to worry about that. That has not gone away, and I don't think there's any talk about it going away in the near future. Bridget: And in our office, we do this a lot. When people stop working, don't need to take required minimum distributions and are not taking Social Security yet, then we look at, okay, should we do some Roth conversions while they're still in the, say, 10% or 12% bracket, and we think they're going to be in a higher bracket later? Just a quick recap of that strategy. Another thing they have not changed is the qualified charitable distribution age, which is kind of awkward. Not just to say, but the whole rule is awkward, so I kind of wish they had changed it, one way or another.

John: What it used to be is when you turned 70 and a half, you had to take money out of your IRAs. And when you turn 70 and a half, you could make donations to charity from your IRAs, this qualified charitable distribution, or QCD, so it was nice and neat, but they were both the same thing. Now, not so much.

Bridget: No. Now you can make qualified charitable distributions when you are 70 and a half.

John: That hasn't changed, but the minimum age for taking out money went from 70 and a half to 72, then it could be 73, then it's going to be 75. So the age we have to take it out is changing, but the age where you can make these donations has not changed. Again, a planning opportunity for people, but it's something that hasn't been changed, and so you need to be aware that. If you're 70 and a half, you can make donations from your IRA, which can be, in the right situation, a great tax thing to do, but used to be tied to the minimum distributions. Now no, those are two separate things we got to keep track of.

Bridget: Yeah. And I wish it was just either 70 or 71. By the time you're 70, who keeps track of half year?

John: You don't keep your half year birthday? Six months, twelve months, 18 months, and now I'm 70 and 6 months. Is that how we think about it? 😊

Bridget: Right. So next thing they haven't changed is capital gains rates.

John: Yeah, there's a lot of talk about that right before the last presidential election. What's going to happen if there's a change in political regime and then capital gains taxes are slated to go up? A lot of conversations back in those days, do we take those Roth, do we take capital gains today to take advantage of these low rates, because, boy, they're going to change it? No, didn't happen. Didn't happen in Secure 2.0. Not on the horizon for things.

Bridget: And my two cents as somebody who's been doing taxes for 25 years is that kind of legislation is hard. And so, it takes a lot of work to get. It's a hot button issue, so there're just a lot of people that don't want it.

John: I just want to make sure we point out, too, that Bridget started doing taxes when she was ten😊

Bridget: Right. Next item. Step up in basis.

John: Yeah. And so that's, again, talking about these capital gains things. What happens when a person dies? Now, if I buy a stock for $10,000 and it goes up to $100,000, when I die, it goes to my kids. And now their basis, in tax jargon, is $100,000. They don't have to pay taxes on any of those gains. So there was conversation about, well, jeez, that doesn't seem fair, which can be a legitimate point. And you say, “Well, maybe we should not have this step up in basis.” Listen, if I would have paid taxes when I sell that stock, my kids should pay taxes when they sell that stock.

Not illogical by any stretch, but that is off the table. We haven't seen any conversation. From a record keeping standpoint, golly, that opens a can of worms, too. So whether it's good or bad, we're not talking about that necessarily. It could be a reasonable thing, or it could be a gigantic pain, but that's not on the table. And it was, again, a big topic of discussion a couple of years ago, when people would say, “Hey, when the Democrats get in control, what are they going to do as far as making these changes? Gigantic tax changes?” This is not one of those things to think about.

Bridget: Yeah. And if you die, first goes to your spouse generally and then to your kids, so whoever inherits it.

John: That’s right. I said kids but it could be a spouse.

Bridget: It takes the burden off of them. All they have to remember is the day you die, and then they can look up what the step of the basis is. So this is one of those things that the tax preparers actually don't want—the step up the basis—just as much as the people who inherit the money.

John: Right.

Bridget: And the last item, estate tax rules.

John: Yeah. So as it stands right now, there's a giant exemption of $11 million. When I die, I can pass that to my family, spouse, kids. And there was talk about it going back. And I can never remember the exact number, but it goes back to around $5 million. That's going to happen here in 2026 when the tax law reverts back to the old law, but they were talking about maybe even a million-dollar exemption, which, I mean, it's a lot of money, but suddenly you take a look at your 401K and your house and some life insurance, and this could catch a lot of people with the estate tax. There have been a lot of discussions about making changes to this.

And again, we’re not going to argue whether it's right or wrong, but the idea is that there were big discussions but now nothing happened. I knew people that were making plans based on what they thought was going to happen, and all those are off the table, at least for the current tax thinking. And I think maybe this is a great time to sort of wrap up and talk about this idea that there are some really important things to know about what's not in the plan. As you think about this stuff, however, trying to guess what's going to happen and saying, “Oh, yeah, we know this is going to happen.” Golly, that's really tough to do, and you know this with your experience going back since you were ten years old😊

Bridget: Right.

John: But there is a tax law change coming down the pike in 2026, right?

Bridget: Right. That's a good time to be having your heads up. It's more likely to have significant change in 2026 because that is when the current law expires. If they don't do anything, it will revert to the previous law. And so, that's a logical time for the politicians to be motivated to work on it, because again, this stuff is hard for them to work out.

John: Right.

Bridget: It's difficult on both sides of it.

John: Yes. And so, it's not like we're predicting that nothing's going to happen till 2026, but that's a trigger point.

Bridget: Right.

John: So it wouldn't be surprising if nothing happens for a few years, and then as the taxes are going to change anyway, maybe that's going to be one of these trigger points. So just keep that in mind as you think about that. And even when we get to that point, when they say, “Yep, we're going to do something,” we have no idea what it is. There's no reason to make any changes. Be aware, be informed, but making changes based on what you think might happen, in many cases but especially taxes, is not a recipe for success.

Bridget: And so, with that, I am Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois.

John: And I'm John Scherer. I have a fee-only financial planning practice in Middleton, Wisconsin. Both Bridget and I are members of the Alliance of Comprehensive Planners, and both Bridget and I are taking on new clients and we're looking to add new people to our practices. But if you like what we talk about and want somebody in your direct area, you can check out

Bridget: Please subscribe.

John: That's right.

At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.

12 views0 comments
bottom of page