Retirement Savings Bill - Secure Act 2.0

[WFJ]

I know of one firm very large discount broker that does not support a 72t. Assume one can take their money out, but will receive no support if one has to prove to the IRS they have followed all 72t rules. If money in a 401k was needed, a ROTH rollover and wait 5 years rather than attempt a 72t almost always dominates a 72t strategy. There are also complexities that can arise from some of these obscure retirement rules and taxes that can swamp any benefits. I looked at doing a 72t, but in my case, it did not make sense and haven't come across anyone where it does.

Firms can now offer an annuity, which will magically make a 72t look promising.

I've seen TIAA reps claim that 403b/457/401k retirement plans 'have' to be rolled into an annuity, crushing the investor with fees enriching the firm. Secure 2.0 supercharges this high fee investment.

[unemployable]

Assume one can take their money out, but will receive no support if one has to prove to the IRS they have followed all 72t rules.

You don't get "support" from a broker for any of the other reasons to pull money out, penalty-free or not; why should a 72t be any different?

Vanguard basically told me it's none of their business. They file the 1099=R and you file the 5329 or 8915 or whatever.

I'm sure how fruitful it is to get into internet arguments with someone who thinks "Roth" is an acronym. But you're demonstrating my point about the scare tactics. It's not as onerous as you're making it out to be. People do it.

[IlliniDave]

The thing about annuities is that despite the cost they are probably a good solution for a lot of people. Even in my case where I happened to get grandfathered into an old school retirement plan (completely separate from 401k) and had no other choice but to take it as an annuity, having it simplifies things. A lot of people seem to/plan to use them as a longevity hedge and/or as a partial solution to financial management at ages where cognitive decline is likely. I never really considered them because I knew I'd have a modest one from my employer and SS eventually, meaning I get the "benefit" of them anyway. I don't think I would have bought one at the onset of retirement, but I'd have probably left the door open to buying an immediate annuity late in the game

That said, too much annuitization is not a good thing when I look at what would work for me. The biggest drawback is if you plow the whole nest egg into annuities you lose one of the main side benefits--the stash being a ginormous emergency fund as well as bankroll for the occasional nice-to-have or even a heretical luxury. I found a great irony in my own financial journey in that once I got my shit together and things I desired but couldn't afford prior became affordable, the desire for most of them plummeted. Having the stash actually erased one of the main motivations for putting it together. But it's still there if things change. I tend to like flexibility.

I did spend a lot of time looking at 72t and Roth vs Traditional. As a single filer who played his OMY card several times, I fall in the 22% marginal bracket from just the annuity, and was a couple brackets higher as an earner. Aside from doing the backdoor Roth outside of workplace retirement accounts, I passed on the "Roth 401k" option when it became available in my employer's plan, and in the diminishing window of possible early withdrawals 72t seemed the more flexible (afaik, there's no way to undo the Roth conversion once it's done, but I can still convert to Roth if it makes sense to do so at some point). I just have very limited ability to lower my taxable income.

First world problems, I know. I'm not close to ERE when it comes to any financial measure, but so far I'm still a net saver without even taking reinvested dividends/distributions into account.