Rule Changes | Digital Joneses & Restricted Stocks

RMD Rule Changes: The legislation enacted in the SECURE Act 2.0 provides several changes that could help strengthen the retirement system. The law builds on earlier legislation, but there are some key takeaways about which you should be aware:

The age to start taking your Required Minimum Distribution (RMD) increased to age 73 in 2023 and will increase to 75 in 2033.
The penalty for failing to take an RMD decreased to 25% of the RMD amount and 10% if corrected in a timely manner for IRAs.
Starting in 2024, RMDs in employer retirement plans will no longer be required from Roth accounts.
Catch-up contributions will increase in 2025 for 401(k), 403(b), governmental plans, and IRA account holders.
Defined contribution retirement plans will allow the addition of an emergency savings account associated with a Roth account.

While RMDs are required to be withdrawn by December 31, we recommend you reach out to your financial planning team sooner so we can discuss your plans. We are happy to help you determine what needs to be completed and the best approach. We are here to help.

Keeping Up: It’s no secret that Americans spend a large amount of time on social media. With the rise of mental health issues, this has been a hot topic. One aspect often overlooked, however, is our financial self-esteem. A recent study revealed that three-quarters of Americans say their friends portray themselves on social media as wealthier than they are (74%).

Whether or not they believe what they see, the study shows that it still filters into their psyche. One in four feel less satisfied with the amount of money they have because of social media (27%). Among those under 50, 4 in 10 feel jealous when they see their friends’ vacation photos online (42%).

The result: a third say they’ve spent more on something (i.e., vacation, home renovation, luxury item) than they could afford due to the pressure of keeping up with the “digital Joneses” (33%). This financial fear of missing out is even greater for those who scroll more than three hours a day (51% admitted to overspending) compared to less than one hour daily (16%).

Restricted Stock Units: Restricted Stock Units, or RSUs, are the most common form of equity compensation. This style of compensation is used in every industry, from technology to railroads.

Below are the two main areas of focus regarding RSUs:

There are no tax benefits to holding RSUs past their vest date. When you receive an RSU vest, it’s the equivalent of your company handing you a lump sum of cash, and then you purchase the stock. If it sounds overly simple, that’s because it is.
After receiving RSUs, did you notice an uptick in tax payments and interest due on your tax return? If the answer is “yes,” it is more than likely coming from the RSU vest. Don’t worry. This is common. However, there is a better way to do it. Your company only withholds 22% from each RSU vest. If your tax rate is 25%, you incur a 3% balance to the IRS. You can take 3% of the gross RSU vest and make a tax payment directly to the IRS. That’s it. FYI, the same situation applies to state income tax.

If you have RSUs, we want to speak with you.

Business Briefing:

Rate Cuts Will Have to Wait: The Federal Reserve is putting off interest-rate cuts for the foreseeable future. The central bank’s policymakers decided this week to hold their benchmark federal fund rate steady in a range of 5.25 to 5.5 percent, the highest level in more than two decades. The Fed acknowledged recent inflation setbacks, but Fed chair Jerome Powell said, “he didn’t think it was likely the Fed would need to consider interest-rate increases.” (The Wall Street Journal)
Consumer Confidence Falls: April revealed a decrease in consumer confidence as Americans juggled elevated inflation, high borrowing costs, and a gradually cooling labor market. Dropping to 97 from March’s 103.1, consumer confidence fell to its lowest level since mid-2022. The outlook on the job market worsened, with income expectations also deteriorating. (Bloomberg)
Hotel Chains Pitching Tents: Some hotel chains, including Hyatt and Hilton, suddenly see a future in luxury tents. Americans flocked outdoors during the pandemic for vacations safe from the threat of Covid. That fueled demand for glamourous camping—or glamping. Markets call glamping an “aggressive growth segment,” with 4 in 10 campers interested in the fancy accommodations. Hilton is letting people use their Hilton Honors points at AutoCamp luxury campgrounds. Hyatt announced it will offer hotel rewards at five glamping resorts. (Business Insider)

It’s only been 26 years: It might have been the 1900s, but just 26 years ago, on this day, Steve Jobs introduced Apple’s first iMac, a personal computer that became hugely successful and helped revive the struggling company.