Pros, Cons and Why the SECURE Act WON’T Make Your Retirement More Secure

The SECURE Act of 2019 is supposed to help more Americans save for retirement. The new legislation will have an impact on retirement plans – and not all of them are good.

In December of 2019, Congress passed H.R.1994 – the SECURE Act of 2019 – which contains the most sweeping changes to government-controlled retirement accounts – such as 401(k)s, 403(b)s, and IRAs – in more than a decade.

The SECURE legislation – which stands for “Setting Every Community Up for Retirement Enhancement” – put into place several provisions supposedly intended to strengthen retirement security.

Not surprisingly, the financial services industry spent many millions of dollars lobbying Congress to ensure passage.

So is the new legislation in your best interests? Is the SECURE Act really likely to increase your retirement security?

Knowledge is power, and the SECURE Act will impact your retirement savings, so stick with me while we look at…

The Good, the Bad, and the Ugly of the 2019 SECURE Act…

The Good: The SECURE Act legislation removed regulatory barriers that prevented companies from offering lifetime-income options in their employees’ retirement plans.

These lifetime-income options come in the form of annuities which provide a guaranteed income over the course of your retirement – no matter how long you live.

One of the biggest fears people have today is living longer than their money, and thanks to the rise of “do-it-yourself” 401(k)s and IRAs, those fears have been stoked because these plans give you no guarantees and no way to predict how much money you’ll actually have when you need it.

There are many kinds of annuities, and some are much better than others. Although I have rarely discussed annuities, my husband and I own six annuities of various types. They give us great peace of mind, and I will discuss them more in the future.

The Problem: Although the legislation is a big step in the right direction to encourage retirement plans to offer lifetime income options, the fact remains that the amount of money people have been able to save in their 401(k)s and IRAs doesn’t even come close to being able to provide a comfortable retirement lifestyle.

According to the most recent Federal Reserve Survey of Consumer Finances, the typical household approaching retirement has saved enough in their combined 401(k)s and IRAs to provide an annuitized income of only $600 per month! That’s not even enough money to cover groceries, let alone health care, heating, transportation, and other necessities.

The Good: The age at which you must start taking withdrawals from your government-controlled retirement account – your Required Minimum Distribution or RMD – has been pushed back from the year you turn age 70.5 to age 72.

That would seem to be a good thing for retirees who don’t need or want to take withdrawals, right?

The Problem: Some seniors are discovering that once they have to start taking their RMDs, they’re being pushed into the highest tax brackets of their lives!

The whole reason for RMDs is that the IRS needs the revenue from the taxes they let you defer all those years in your tax-deferred accounts.

So let me ask you, why do you think the government wants Americans to build a huge pool of money that’s going to be FULLY TAXABLE in the future?

Could it be because they’ll need enormous amounts of revenue to cover our country’s runaway debt and to pay for all the Social Security and Medicare benefits they’ve promised our aging population? Do you really think tax rates can go anywhere but UP over the next 20 to 30 years?

Now Let’s Discuss What’s BAD About the SECURE Act

The Bad: The SECURE Act makes it easier for small businesses to set up automatic enrollment in retirement plans for its workers and to band together with other companies.

Wait, what!?! You’re probably wondering how that could be a bad thing…

I can assure you that Wall Street is whooping for joy over this. After all, what’s not to like about the prospect of having more of your dollars automatically going into these plans where they can charge you confiscatory fees and offer no guarantees – other than the guarantee that they’ll get paid whether you make money… or lose your shirt in the next market crash.

Fees can easily consume one-third to one-half of your account value, as I prove in Chapter 7 of my new book, Rescue Your Retirement: Five Wealth-Killing Traps of 401(k)s, IRAs and Roth Plans – and How to Avoid Them! You can get a FREE copy of the book for just a small shipping charge here, if you haven’t already.

The Bad: In most cases, the increased contribution you make to a 401(k), 403(b) or similar plan will go into a Target Date Fund (TDF), since 90% of employers now have TDFs as the “default option.” That means your employer automatically puts your money into it unless you specifically tell them otherwise (which almost no one does).

I explain in Chapter 3 of my book, Rescue Your Retirement, why TDFs are bad for your wealth and why you should avoid them at all costs. And if you really want to get scared out of your wits, listen to the recent interview I did about the problems with TDFs for the Wall Street Journal podcast.

And Now for the Truly UGLY Parts of the New Retirement Law…

The Ugly: The passage of the SECURE Act legislation makes it obvious how little control you have over the money in your government-sponsored 401(k), IRA, or similar plan. Once you put money into these plans, they control it.

They can – and do – change the rules any time they want – and they don’t need your permission to do it.

Decades of careful tax and estate planning by families were thrown out the window when Congress drastically and immediately changed the laws for inherited or so-called “stretch” IRAs, as part of the SECURE Act.

The REALLY Ugly: Even though many experts have declared the 401(k) an experiment that has failed, Wall Street has just succeeded in finding yet more ways to lock up more of your hard-earned money into accounts that lack guarantees, predictability, control or liquidity, while charging you insane fees for the privilege.

Even Ted Benna – the man who invented the 401(k) – says it’s become a monster that should be destroyed.

Benna says that he now puts most of his own money into the high cash-value, low-commission, dividend-paying whole life policies most commonly known as Bank On Yourself-type policies.

The “Father of the 401(k)” now prefers the Bank On Yourself strategy because it gives you an unbeatable combination of advantages, including:

  • Control of your money
  • A 160+ year track record of guaranteed growth, even when the market is crashing
  • Unmatched ability to access your money without restrictions or penalties
  • Tax-deferred growth and tax-free retirement income
  • The rules of your contract can’t be changed unless you agree to it

The bottom line is any legislation that impacts your 401(k), IRA or other kind of retirement plan needs to be scrutinized. While the SECURE Act has a nice name and looks good on paper, when you dig into the nitty-gritty, it’s anything but “secure.”

However, there is an alternative to retirement savings plans that are run by the government and loved by Wall Street: Bank On Yourself. Using the Bank On Yourself strategy, a Bank On Yourself Authorized Advisor can show you how to use a super-charged dividend-paying whole life insurance policy, along with annuities where appropriate, to secure your financial future.

You’ll gain many advantages missing from 401(k)s and IRAs, such as guaranteed growth, control of your money, liquidity, safety, and numerous tax advantages. To find out how a custom-tailored plan can help you reach your financial goals and objectives – without taking any unnecessary risks, request a FREE, no-obligation Analysis and referral to an Authorized Advisor.

Four Helpful Tips for Keeping New Year’s Resolutions to Spend Less and Save More

It probably won’t come as a surprise that the two most common New Year’s financial resolutions are to save more money… and to spend less.

And it also should come as no surprise that most New Year’s resolutions have been abandoned by Valentine’s Day – if not sooner!

So I thought this would be a great time to give you some tips to help you stick with it.

Let’s start with tips for spending less money because if you don’t spend less, it’s very difficult – or impossible – to save more.

Tip #1 for Curbing Spending: Get the Right Budgeting Program

I know, I know! The moment many people even hear the word “budget,” they get turned off because the word conjures up “deprivation,” just like the word “diet.” But hear me out… [Read more…] “Four Helpful Tips for Keeping New Year’s Resolutions to Spend Less and Save More”

3 Reasons Why the Money in Your 401(k)/IRA Doesn’t Belong to You

If you get regular account statements, you probably know the approximate current value of your 401(k) and/or IRAs, so please write that total down now.

Do you think all that money belongs to you?

It doesn’t… and what people find most surprising is how little of your account value actually does belong to you.

3 Reasons the Money in Your 401(k) Doesn’t Belong to You…

Reason #1: You May Not Be Fully Vested

[Read more…] “3 Reasons Why the Money in Your 401(k)/IRA Doesn’t Belong to You”

The Wall Street Journal Podcast Interview with Pamela Yellen: The Biggest 401(k) Mistake People Make

I was just interviewed again by the Wall Street Journal for an episode of their “Your Money Briefing” podcast.

The episode is described as, “Financial security expert Pamela Yellen explains why employees should take control of their 401(k) retirement investments and not rely on their employer to invest for them.”

In this eye-opening interview I discuss:

  • Why it’s very likely that your 401(k) money is in a Target Date Fund (TDF) – even if you didn’t authorize it or request it – and three reasons that should concern you
  • 98% of all employers use TDFs, and 90% have it as the “default option,” which means they automatically put your money there unless you specifically direct them to do otherwise – and almost no one does
  • Near retirement? You’re not protected! TDFs are supposed to dial back risk as you near retirement, but in practice, that hasn’t happened. In 2008, some TDFs designed for participants expecting to retire in two years lost as much as 40%!
  • How the shockingly high fees of TDFs devour your hard-earned savings
  • The dangers of having your retirement savings in a one-size-fits-all financial vehicle
  • How to quickly and easily do your own research to compare the mutual fund options your 401(k) offers
  • How to protect your retirement savings from market volatility and ensure a guaranteed income for life

[Read more…] “The Wall Street Journal Podcast Interview with Pamela Yellen: The Biggest 401(k) Mistake People Make”

Can You Answer This Critical Question About Your Retirement Plan? (Most People Can’t)

Here’s the most critical question you must be able to answer about your retirement plan…

Do you know what your retirement account(s) will be worth on the day you plan to tap into them?

If you’re saving for retirement the way most people do, you couldn’t answer this question if your life depended on it!

And When You Get Right Down to it, Your Life Does Depend on it!

Here are three reasons why… [Read more…] “Can You Answer This Critical Question About Your Retirement Plan? (Most People Can’t)”

The Wall Street Journal Podcast Interview with Pamela Yellen: Why You Won’t Work as Long as You Planned

I was recently interviewed by the Wall Street Journal for an episode of their “Your Money Briefing” podcast.

The episode is described as, “Financial security expert Pamela Yellen explains why most people stop working earlier than planned, and offers safe investment tips to reduce the chances of running out of money in retirement.”

In this interview I discussed: [Read more…] “The Wall Street Journal Podcast Interview with Pamela Yellen: Why You Won’t Work as Long as You Planned”

Retirees Will Outlive Their Savings by 10 Years, According to a New Study by the World Economic Forum

The typical 65-year-old has only enough savings to cover 9.7 years of retirement income. That leaves the average American man with a gap of 8.3 years, and women (who live longer) face a 10.9-year gap with no savings left.

That’s according to a scary new study by the World Economic Forum. This assumes you live an average lifespan. If you’re one of the “lucky” ones who lives longer, you could outlive your money by 20 to 25 years or more.

6 Challenges You Face that Could Turn Your Retirement Dreams into a Retirement Nightmare…

How many of these challenges have you prepared for?

Challenge #1: The typical household nearing retirement has an average of only $135,000 in their combined retirement accounts – enough to provide at most $600 per month income. (Source: Federal Reserve Survey of Consumer Finances)

Challenge #2: Even healthy couples will face extreme health care costs in retirement. [Read more…] “Retirees Will Outlive Their Savings by 10 Years, According to a New Study by the World Economic Forum”

Retirement Can Be Fantastic … If You’re Prepared

What do you think of when you think of retirement? Freedom? Enjoyment? Less stress?

You’re not alone. Most workers today associate retirement with those concepts, according to What Is “Retirement”? Three Generations Prepare for Older Age, the latest study from the nonprofit Transamerica Center for Retirement Studies.

But the big question is … Will You Be Ready?

Will You Be Healthy Enough to Retire the Way You Hope To?

Just 16% of Baby Boomers surveyed said their health is “excellent.” But only about half of the workers in the survey said they exercise regularly … or eat healthfully … or get enough sleep.

Here’s the issue, as laid out bluntly by life coach Peter Sage …

If you don’t make time for health, you’ll have to make time for illness.”

How successful at life can you be, when your body refuses to serve you? And it will eventually refuse to serve you if you ignore your health.

Will You Have Enough Money to Do What You Want to Do?

Two out of three workers say their big retirement dream is travel. Half of those surveyed said they’re looking forward to spending time with their family and friends. And nearly half get a smile on their faces when they think of the time they’ll have to pursue their hobbies.

The problem is this: half of those surveyed have less than $50,000 total in all their household retirement accounts.

How far will $50,000 take you? [Read more…] “Retirement Can Be Fantastic … If You’re Prepared”

There’s a Good Chance You May Be Forced to Retire Sooner Than You Expect

Perhaps you’ve heard that the best way to make God laugh is to tell him your plans. … Particularly your plans for retirement!

And you’ve probably heard that with the unpredictability of the markets – stocks, bonds, real estate, whatever – you’re going to need to work longer than you had planned, in order to have enough to live on in retirement.

But that doesn’t mean the universe will cooperate.

Research from the Center for Retirement Research reveals that on average 21 percent of workers intend to work to age 66 or later. But more than half of them fail to reach this target.

The share of workers who say they expect to work past age 65 rose from 16% in 1991 to 48% in 2018. But the study shows that 37 percent of all workers end up retiring earlier than they had planned.

How can this be?

Why Are Hard-Working Americans Retiring Earlier Than Planned?

[Read more…] “There’s a Good Chance You May Be Forced to Retire Sooner Than You Expect”

Many Stock Market Investors Haven’t Kept Up With Inflation Over the Last 20 Years – DALBAR 2019 Report

What kind of return would you have to get in the stock market to make it worth the risk and gut-wrenching ups and downs?

Would you put your life’s savings at risk for a 5% annual return?

Or would you require at least a 7% return?

Or maybe even a 10% annual return?

If you’re like most people we’ve surveyed, you wouldn’t do it unless you thought you could get at least a 7% annual return over time, right?

Here’s the Harsh Reality of the Actual Returns Investors Are Getting…

I hope you’re sitting down because this is going to floor you: According to a new study, the typical investor in equity mutual funds has gotten only a 3.88% annual return… over the last 20 years!

But it’s actually much worse than that. Here’s why… [Read more…] “Many Stock Market Investors Haven’t Kept Up With Inflation Over the Last 20 Years – DALBAR 2019 Report”