I’m sure you have heard the news about the recent Inflation Reduction Act, but what will this Act mean to you as a retiree? We’ll explore this question by examining an article written by Kelly Anne Smith over at Forbes.

If politics isn’t your thing, don’t worry, it’s not mine either. I scour the internet looking for the most neutral, least political articles that I can get my hands on. So, if you are interested in only the facts and how they apply to you, then don’t miss out on the retirement headlines segment today to hear what the Inflation Reduction Act could mean for you.

In the listener questions segment, I have a 3-part question from a listener survey respondent. I’ll answer whether you should convert a 401k or traditional IRA to a Roth IRA first, the pros and cons of converting 401Ks and IRAs, and whether there is any rush to convert 401Ks to Roth IRAs.

If you are interested in only the facts and how they apply to you, then listen to the retirement headlines segment to hear what the Inflation Reduction Act could mean for you. Click To Tweet

Outline of This Episode

  • [3:02] What the Inflation Reduction Act means for you
  • [11:32] On converting to Roth IRAs from 401K or IRA

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Do you subscribe to the Everyday Is Saturday newsletter? If you don’t, now is a great time to join since we have 2 different book giveaways this month! The first book is written by my personal coach, Benjamin Hardy, and is titled Be Your Future Self Now.

The second book is meant for business owners but really applies to retirees. It is written by Gary Kadi and called Raise Your Healthy Deserve Level.

Another reason that you may want to sign up for the Everyday Is Saturday newsletter is that I’ll be looking for beta testers to try out my upcoming course, Retirement Income University. Newsletter subscribers will have first dibs on becoming beta testers and enjoying a discounted rate on enrollment.

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The Inflation Reduction Act doesn’t look much like it did initially

If you listen to the news at all, you have heard the speculations for months about the possible changes that this new bill could bring. The early adaptations of the bill were loaded with changes that would have had a massive impact on retirement planning. However, like with most bills, what actually passed looked much different than the earlier versions. This is why I don’t like to comment or speculate on proposed bills that may or may not come to fruition.

The Inflation Reduction Act aims to reform the cost of prescription drugs. Click To Tweet

How the Inflation Reduction Act could affect you

Whether or not the Inflation Reduction Act will actually reduce inflation is yet to be determined, but after several months of trying to get something passed, President Biden signed this bill into law in August. The Act covers several areas: combating climate change, lowering the cost of prescription drugs, and raising taxes on corporations.

These are some changes that could affect you in the coming months and years:

  1. It will impose a 15% corporate minimum tax rate. While taxes on individuals and households will NOT increase, corporations with at least $1 billion in income will have their rates increased to 15%. Also, stock buybacks by corporations will have a 1% excise tax.
  2. It aims to reform the cost of prescription drugs. Medicare will now be allowed to negotiate the price of prescription drugs which will bring down the price of medications. Starting in 2025, Medicare recipients will also have a $2,000 cap on their annual out-of-pocket prescription drug costs.
  3. The bill will address IRS funding by setting aside $80 billion for the IRS over the next 10 years. This does not necessarily mean that there will be more aggressive auditing, it could simply help with the massive backlog of work.
  4. It extends Affordable Care Act (ACA) subsidies. Current federal subsidies of medical insurance premiums will be extended through 2025 which will affect the 3 million Americans in danger of losing their health insurance.
  5. The bill aims to encourage investment in clean energy. It includes numerous investments in climate protection, including tax credits for households to offset energy costs, investments in clean energy production, and tax credits aimed at reducing carbon emissions.

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