SECURE 2.0 empowers fintech to help advisors navigate the tax period

Many provisions of SECURE Act 2.0 give fintech companies the opportunity to help financial advisors get through the tax season.

The latest information comes from eMoney Advisor, which has added new features to its financial planning software that allow advisors to demonstrate the impact of Roth conversions and other tax strategies on plans. The new tax bracket report overlaps a customer’s tax bracket floor with their annual tax base and the taxable portion of any Roth conversion, while Roth’s scale-based automated conversion tool quickly converts assets until a breakpoint between marginal tax brackets is reached.

According to Josh Belfiore, manager of eMoney, the Roth conversion is a focus for advisors as they focus on changes brought about by the 92 provisions included in the SECURE Act 2.0, a comprehensive retirement savings law signed into law by President Biden late last year. consulting products.

“These new capabilities allow consultants to have dynamic conversations about tax planning with their clients,” Belfiore said in a statement.

New tools are available in the eMoney control panel for cash flow planning, Decision Center.

EMoney has also updated its software to reflect some of the SECURE 2.0 changes, such as an increase in the age at which people must begin receiving the required minimum payout, which increases to 73 in 2023 and then to 75 in 2033; Roth qualified employer funds are no longer subject to the RMD; and catch-up contributions to an individual retirement account indexed for inflation.

The Fidelity-owned financial planner isn’t the only fintech company looking to help advisors keep up with changes to the tax code. For example, FP Alpha provides a Roth conversion simulator that determines how much to convert, when to convert, and how much it costs.

“Tax laws are constantly changing and it is difficult for advisors to keep track of what has changed and what year it takes effect,” Andrew Altfest, founder and CEO of FP Alpha, wrote in an email. He added that Fintech can help advisors keep up with the times. “[FP Alpha] has data for each year and is updated to reflect new legislation, however [we] make sure it only applies to the relevant years when it actually comes into effect in accordance with the law.”

After five years of rapid IRA expansion, a sharp market downturn in 2022 should put pressure on rolled-over IRA balances in 2023, according to Sean O’Brien, deputy director of research firm Cerulli Associates. This, combined with the SECURE 2.0 Act, could result in large net flows to defined contribution plans, O’Brien said.

“In addition, SECURE 2.0’s auto-enrollment and auto-escalation provisions, as well as ongoing legislative and market efforts to expand the coverage of workplace pension plans, may contribute to stronger contribution growth in the coming years,” O’Brien said in a statement.

This is giving some momentum to Vestwell, a digital records company that helps financial advisors offer workplace retirement plans for small and medium-sized businesses. Vestwell recently partnered with the Carson Group on a new offering to help consultants expand their 401(k) offerings.

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