dsmWealth: June 1, 2023

BY STEVE DINNEN

The Employee Retirement Income Security Act of 1974 was rightly hailed as a landmark law that built the framework for defined benefit and contribution plans. Nearly half a century later, Congress has overhauled it with the Secure 2.0 Act, which further delineates minimum standards for the administration of private pension plans and shapes how they are taxed.

The new law has 92 provisions that affect retirement plans, which were created to increase savings. And that’s a good idea: Vanguard estimates the average 401(k) account balance for a worker at age 65 is $279,997, hardly enough to carry you through 20 or more years of retirement. So the rules are being simplified and clarified, and coverage is being expanded.

Jonathan Yahn (pictured), an attorney and ERISA compliance specialist with the Minnesota-based financial services firm Ascensus, was recently in town to talk with the Financial Planning Association of Iowa and spelled out some highlights. Among them:

The age for the required minimum distribution (RMD) — the amount you have to withdraw from your account — will bump to 75 from 73 starting in 2033.

New plans must automatically enroll employees starting in 2025. The minimum will be a 3% deduction from your paycheck, and that will rise each year until it hits 10%. There are exceptions, and employees can always opt out, but that’s unwise. (Almost a third of employees who are eligible to participate in a 401(k) decline to do so.)

Unspent funds — up to $35,000 — from a 529 college savings plan that has been open at least 15 years can be rolled into a Roth IRA in the name of the beneficiary starting in 2024.

Catch-up provisions for high-wage earners must be made on a Roth IRA basis starting in 2024.

Speaking of Roth:

If you have a simplified employment pension (SEP) plan, you now can also have a Roth.

Long-term part-time employees with as few as 500 hours of work in a year now will be eligible to join.

People who are at least 70 and a half years old can direct up to $100,000 in distributions per year from a traditional IRA to charity. Starting in 2024, the maximum contribution amount increase will be based on the inflation rate.

For a tax break, act soon to qualify for Endow Iowa incentive
BY STEVE DINNEN

Change is coming to Endow Iowa. So now might be a good time to cut a check and try to qualify for this state-authorized tax break.

The Iowa Economic Development Authority can award up to $6 million annually in tax credits for charitable gifts arranged through community foundations across the state. The program is typically oversubscribed, which leaves credit applications above that limit on a waitlist for the next year’s allotment. But that waitlist will be eliminated on July 1, when the state’s new fiscal year begins.

Donors who submit an application for the tax credit before June 30 will continue to be placed on a waitlist. The Community Foundation of Greater Des Moines is encouraging folks to act by June 15 to get their paperwork processed.

Beginning Jan. 1, tax credits of 25% of the gifted amount are limited to $100,000 in tax credits per individual for a gift of $400,000. That limit increases to $200,000 in tax credits per couple for a gift of $800,000 if both are Iowa taxpayers.

In 2022, tax credit applications added up to almost $24 million in charitable giving leveraged by the credits. At least 79 community foundations and community affiliate organizations received Endow Iowa qualified donations from nearly 2,000 businesses and individuals.

How to take longer and more luxurious vacations
BY ERICA SANDBERG FOR U.S. NEWS & WORLD REPORT

While many people are downsizing their vacation budgets or delaying trips for a less expensive future, others have decided to go all out with opulent or extended vacations.

Despite inflation concerns, a World Travel & Tourism Council and Trip.com report found that 31% of travelers said they intend to spend more on international travel this year than in 2022, and a Flywire survey found that 84% of luxury travelers are preparing to take longer vacations this year than they did over the past 18 months.

For some, luxury means flying first or business class, while for others it's dining out for every meal or simply doing things that feel indulgent.

Ariel Barrionuevo, the managing director of La Coralina Island House in Bocas del Toro, Panama, has been surprised by what guests are seeking post-pandemic. Rather than lavish perks, they’re valuing little luxuries.

“They look for products that offer them more comfort, wellness and well-being activities related to good gastronomy, adventure and longer stays in the hotel," he said.

If you’re ready to plan your version of a luxury vacation but also need to economize, try these strategies:

Book off peak season. “Don’t travel when the world travels,” said Brett Keller, CEO of Priceline. “Sure, there may be a few rainy afternoons sprinkled in here and there but luxury travelers are getting the five-star product and treatment for a lesser cost," he added. Always wanted to go to Rome? You’ll find the best deals November through February. If Thailand is on your list and you don’t mind the heat, plan to go during April or May.

Bundle up. Keller said customers who combine first-class tickets with high-end luxury properties can save hundreds of dollars on their trips by accessing package discount rates. Some of the best properties in the world in top destinations offer deals like this.

Go for high-end, all-inclusive resorts. If you’re not keen on moving around once you arrive at the destination, consider a five-star resort that includes dining, drinking and activities. You can keep to your budget and avoid surprise bills at the end of the trip while you receive premier service and amenities.

Consider countries where your dollar goes furthest. Want the best of the best but also need to keep spending to a minimum? Research countries with favorable currency exchange rates or where you just get more for your money. “We notice that many Americans are seeking luxury in Argentina, especially when looking at summer 2023 bookings,” said Nicolás Etcheverrito of Visit Argentina. He explained it has a lower price than most European destinations but the same level of luxury. A room at the Four Seasons in Buenos Aires might be $700, compared with $2,000 in Paris.

Find out if the hotel is offering time-sensitive packages. Whether you'll be traveling in or out of the United States, go directly to the hotel’s website to see if there are any well-priced packages available. They can dramatically elevate your vacation without greatly increasing the cost. For example, to celebrate the Hyatt Regency San Francisco 50th anniversary, the hotel is offering a package with an upgraded room, complimentary club access, two signature cocktails at check-in and two cable car tickets. Details like these can give you the VIP experience you’re craving.

Southwest Airlines' rewards top Kiplinger awards

BY LISA GERSTNER FOR KIPLINGER

The Kiplinger Readers’ Choice Awards aim to recognize and celebrate the best products and services in the personal finance arena. We asked Kiplinger readers to help us name the products and services that delivered excellent value in the past year.

Our awards recognize excellence in everything from credit cards, banks and brokers to insurers, tax software and financial apps. More than 2,600 readers responded to our survey, and for each category, we’ve listed an overall winner that earned the highest score.

For airline credit card rewards programs, Southwest Airlines was the overall winner. Its program is the only one that achieved “outstanding” in our awards for all three criteria that readers rated: customer service, most recommended, and overall satisfaction.

The Southwest Rapid Rewards credit cards, which are issued with Chase, include the Plus card ($69 annual fee), Premier card ($99) and Priority card ($149). Recently, all the cards offered an initial bonus of 50,000 Rapid Rewards points for those who spend $1,000 in the first three months. And they all provide 25% back on in-flight purchases.

The Plus card provides two points per dollar on Southwest purchases, while the Premier and Priority cards provide three points per dollar on Southwest spending. All the cards offer two points per dollar on spending with Rapid Rewards hotel and car rental partners; local transit; and internet, cable, phone and select streaming services. Other spending gets one point per dollar.

The Priority card layers on the most benefits, including a $75 annual credit for eligible Southwest purchases, a bonus of 7,500 Rapid Rewards points on each yearly anniversary of card membership, reimbursement of up to four upgraded boardings per year, 10,000 Companion Pass qualifying points each year (a Companion Pass allows you to fly with one person free of airline charges each time you purchase or redeem points for a flight), and 1,500 tier-qualifying points toward A-List status for every $10,000 spent on the card.

Read more: Other rewards programs that earned high marks are from Alaska Airlines, Delta Air Lines and United Airlines.