The Loosening Of IRA Contributions: Interview With Scott Copeland

ValueWalk’s interview with Scott Copeland, Director of Corporate Services at Keel Point. In this interview, Scott discusses his background, the SECURE Act and the bipartisan support for it, the impact of the loosening of the IRA contributions, and the factors in a retirement plan account.

Can you tell us about your background? 

I was raised in a hardworking, blue collar household. After high school, I worked in the genetics field while pursuing my degrees in Accounting and Finance. Somewhere in the early dot com era, I ran across Peter Lynch’s famous crayon quote.  It stuck and I’ve endeavored to apply his axiom to every aspect of the retirement plan universe.  My office window is currently obscured with drawings and graphs from illustrating various concepts.  That single quote has shaped how I work with both retirement plan committees and their participants.

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What do you think of the SECURE Act?

In its entirety, the SECURE Act delivers small businesses the needed incentives to implement a 401(k) plan. At the same time, it removes some of the more cumbersome rules and barriers for participants.  However, there are a quite a few unnecessary items.

It's rare to see legislation with such bipartisan support, why do you think we saw that here?

You can see influence from both sides of the isle, as well as lobbyists. Support for the bill seems to ride on the insinuation of lower overall fees.  However, the marketplace and technology have already accomplished such efficiencies.  I fear certain provisions – such as the retirement income safe harbors – will allow for layering of additional fees.

How big of an impact would either of these have and how would it impact regular Americans?

Loosening of the IRA contributions for older Americans as well as extending the required beginning distribution date to 72 gives more flexibility when planning for and during retirement. I believe everyone involved will be happy to drop the “70 and ½” from the conversation.

Most Americans cannot contribute anywhere close to the maximum, so how would these bills help?

I fear most Americans will not reap a benefit from the Act. Perhaps employers will be more inclined to start a plan, but it takes a concerted effort by employers, advisors AND coworkers to make a real difference when it comes to participation.  I am certainly a fan of restricting loans from the ATM type mentality.

Many Americans have small 401ks/IRAs, how would this legislation help them?

The two biggest factors in a retirement plan account are contributions and time. While incentivizing Automatic enrollment is a step in the right direction, emphasizing the damage early distributions can have on retirement goals would be very effective. As a 401(k) advisor, I am constantly reminding participants in transition that the 20% mandatory withholding on cash distributions is rarely the final bill.  If a participant has an outstanding loan as well, it often causes a landslide effect.  When the tax bill arrives, participants look back to their retirement accounts as a source of funds. A modification allowing outstanding loans to be repaid on the original amortization schedule would go a long way for the average participant’s 401k account and their retirement readiness.