Advisers anticipate retirement-planning flexibility SECURE 2.0 offers

Financial advisers are looking forward to the increased flexibility they’ll have in helping clients with retirement planning once SECURE 2.0 becomes law.

The comprehensive retirement-savings legislation is part of a $1.65 trillion government-funding bill that the House approved, 225-201, Friday afternoon following Senate passage Thursday afternoon. The measure now heads to President Biden for enactment.

The SECURE 2.0 measure includes 92 provisions designed to increase the number of Americans saving for retirement as well as the size of their nest eggs. On first glance, two reforms particularly appeal to advisers.

One would raise the required minimum distribution age from 72 to 73 next year and then to 75 in 2033. Another would allow for increased catch-up contributions in company retirement plans as well as individual retirement accounts.

“It is a significant step in the right direction,” said Nick Covyeau, owner of Swell Financial. “These two meaningful changes create more planning opportunities for those nearing retirement. [They] allow pre-retirees to save more aggressively and create more flexibility come retirement.”

Jeremy Bohne, founder of Paceline Wealth Management, welcomes greater latitude on RMDs, which he said have been a “pain point” for his clients.

“It’s not transformational,” Bohne said of SECURE 2.0. “It’s really more incrementalism, and that’s a good thing. It’s something that removes pain points for many people in a way that doesn’t cause then to dramatically change their plans.”

The sheer volume of retirement policy contained in SECURE 2.0 gives advisers plenty of talking points for conversations with clients.

“It really does provide a catalyst for advisers to re-engage with their clients on financial planning topics,” said Colleen Jaconetti, senior investment strategist in Vanguard’s Investment Advisory Research Center. “It’s a good reason for outreach.”

For instance, some advisers may have clients who are saving for their children’s college education with 529 plans. A discussion about those vehicles can now also encompass retirement thanks to SECURE 2.0. The bill allows for unused 529 funds to be transferred to a Roth IRA.

“It’s not fair if a child gets a scholarship and you’re not able to freely access the 529 balance,” said Craig Toberman, founder of Toberman Wealth. “They should be able to roll to an account with a similar tax structure.”

Another SECURE 2.0 provision would give advisers an opportunity to reach out to spouses of members of the military. The bill would make them eligible more quickly for a company retirement plan due to the fact that they frequently are uprooted by their husband’s or wife’s service. The provision was championed by Edward Jones.

“It came from a suggestion from one of our clients,” said Lamell McMorris, principal and head of policy, regulatory and government relations at Edward Jones. “That’s part of the organic and Main Street nature of our footprint.”

Advisers can develop niches based on the different groups that are highlighted in SECURE 2.0. They range from small businesses that are given tax incentives to establish retirement plans to firefighters, who are provided with special distribution rules.

“There are a lot of audiences we can serve,” said Bruce Corcoran, head of life and retirement at Coherent, a software provider for retirement platforms. “It allows [advisers] to become experts and customize their service.”

But first advisers have to get their arms around the details of the bill. For instance, some of its provisions go into effect next year, others in 2024, 2025 or later. There also are specific rules for some of the rollovers and other policies.

“Once it’s passed, it will be a matter of looking at different sections and figuring out when you will put that part into your plans,” said Edward Smith, vice president for advanced planning at Janney Montgomery Scott. “We’ve already started working on a summary piece for our advisers. We’ll do continual training for various advisers on what the implications are for them and their clients.”

Advisers are eager to delve into the bill.

“I’m incredibly excited about it,” Corcoran said. “It will be a big step for the industry and the nation’s retirement savers.”