Author: iralogixdev

At IRALOGIX, we recognize that Individual Retirement Accounts (IRAs) are indispensable tools for securing a stable financial future. However, the effectiveness of an IRA program extends beyond selecting the right investments and features; it also involves compliance with an ever-changing regulatory landscape.

For financial institutions, maintaining a compliant IRA program is essential for meeting legal obligations and protecting clients’ financial futures. It is also critical for recognizing new opportunities. This requires a proactive approach to understanding and implementing rule changes affecting IRAs.

Financial advisors, too, must stay informed about rule updates and even potential future changes to be able to guide their clients effectively. By keeping abreast of the latest compliance requirements and tax law changes, advisors can help clients make informed decisions about their retirement savings and tax strategies.

IRALOGIX is committed to assisting both financial institutions and advisors navigate the complexities of IRA compliance and opportunities, helping to ensure a more secure financial future for their clients.

Regulatory Shifts: Stay on Top of IRA Rules

The regulatory environment surrounding IRAs is constantly in flux, in part because it is tied to the tax code. Congress enacts new laws to enhance retirement savings opportunities for more workers but also can change the rules to offset the tax “cost” of these enhancements or other law changes. Regulatory agencies, like the IRS, create operational requirements to help institutions implement the changes and to enforce the rules. To provide high-quality services and avoid penalties, financial institutions and advisors must understand the changes affecting IRAs and integrate them into their forms, procedures, technology, client communications, and staff education.

Overview of Recent Regulatory Changes

Recent law and regulatory changes affecting IRAs have introduced new requirements and options that impact clients’ savings and tax strategies. Here is a partial list of changes that took effect recently and coming up:

Effective beginning in 2023

• Increased RMD age (age 73)
• Withdrawals and repayments for the terminally ill
• Roth contributions for SEP and SIMPLE IRA plans (IRS guidance needed)
• Withdrawals and repayments for qualified disaster victims
• Withholding rules and new Form W-4R required

Effective beginning in 2024

• Increased dollar amount for automatic rollovers ($7,000)
• Rollovers of 529 assets to Roth IRAs
• Additional nonelective contributions allowed for SIMPLE IRA plans
• IRA catch-up contributions subject to COLAs
• Automatic increases to employee contribution limits for SIMPLE IRA plan employers with 25 or fewer employees
• Optional increases to employee and employer contribution limits for SIMPLE IRA plan employers with 26-100 employees
• Withdrawals and repayments for domestic violence victims
• Withdrawals and repayments for personal emergency expenses

Coming in 2025

• New RMD and beneficiary regulations in effect
• Increased catch-up contributions for SIMPLE IRA plan employees ages 60–63

Coming in 2026

• IRA amendments/restatements (pending new IRS documents and guidance)

Coming in 2027

• IRS Saver’s Match deposits to IRAs

These changes are in addition to the annual updates the IRS makes, which also must be incorporated into all aspects of IRA administration:

• Increased contribution limits and income thresholds for IRA tax benefits and IRA-based retirement plans (COLAs)
• Updates to withholding form and taxpayer information
• Changes to Form 1099-R and 5498 reporting

Implications for Financial Institutions

Financial institutions managing their own IRA programs face the ongoing challenges of staying compliant with evolving laws and regulations. In addition to implementing updates and changes into their operations, institutions must also accurately field questions from account holders to avoid miscommunication that could lead to unexpected taxes and penalties. Ongoing efforts to make system updates and train staff can be a significant burden. But noncompliance can lead to steep penalties for financial institutions.

Implications for Financial Advisors and Their Clients

Regulatory shifts and tax updates significantly impact how financial advisors guide retirement savers and wealth management clients, too. Advisors must stay informed to maintain credibility and provide effective retirement strategies. For example, the changes in contribution limits, Roth options, and RMDs can directly affect the strategies advisors recommend to clients. Non-compliance can lead to penalties and unexpected taxes for clients, undermining their financial stability. Moreover, it could harm an advisor’s reputation. Advisors may want to re-evaluate client strategies each year specifically considering IRA rule changes.

Maintain IRA Compliance with IRALOGIX

Incorporating technology into compliance management in the right way is essential in today’s regulatory environment. With an IRA program on IRALOGIX’s platform, financial institutions can offload the burden of ensuring that law and regulatory changes are seamlessly implemented along with annual updates. By taking on the compliance responsibilities of recordkeeping and administering IRA programs, IRALOGIX enables our Partner institutions to focus on growing their businesses and serving their clients. Contact us for more information on our IRA platform and compliance capabilities.

To help our Partner institutions and advisors stay informed about developments in the retirement savings market and understand how those changes can best be positioned for program growth, we provide updates, insights, and tips. We also post articles on legislative and regulatory developments on our website and LinkedIn page.

IRALOGIX, a leading retirement industry fintech provider, today announced that Pete Littlejohn has been named President of the company, effective immediately.

“Since joining IRALOGIX, I have come to highly value Pete’s exceptional judgment, insightful perspectives, and extensive expertise in the retirement marketplace,” said Peter de Silva, CEO of IRALOGIX. “Pete is not only a trusted partner but also an extraordinary leader who commands respect and admiration both within our organization and across the financial services industry. His unwavering commitment to serving our partners, account holders, and associates perfectly aligns with our mission, and I am thrilled to continue working alongside him in his new position as we bring our vision of limitless financial opportunities to life.”

As President and one of IRALOGIX’s co-founders, Pete will continue to lead the company’s sales and relationship management teams while driving forward key strategic goals and initiatives. In this pivotal role, he will play a critical part in guiding IRALOGIX through its next phase of growth, ensuring the company stays at the forefront of innovation in the IRA marketplace.

“Witnessing the growth of IRALOGIX since the days of its founding has been an incredible journey,” said Pete Littlejohn. “I’m honored to step into this role and to continue building on our momentum as we transform the IRA marketplace. I look forward to collaborating with our exceptional team, partners, and clients to drive innovation, deliver unparalleled value, and advance our mission of making retirement a viable option for all.”

401(k) Providers Gave Minimal or No Guidance on Decumulation Strategies as Retirement Approached, Almost Half of Respondents Say

Retirees’ Biggest Challenge Managing Withdrawals: Understanding Range of Decumulation Options Available

A new survey sheds light on the challenges retirees encounter in managing withdrawals from their retirement savings—a process known as decumulation. Findings indicate that a significant number of retirees navigate this phase without a structured plan, choosing to withdraw funds as needs arise rather than following a consistent decumulation strategy. In contrast, only about one-quarter of respondents reported using a systematic approach, drawing down their savings based on a fixed annual percentage.

The survey was commissioned by the retirement industry’s leading fintech pioneer, IRALOGIX, and was conducted in late October 2024.

“This approach runs counter to a process that emphasizes sustainable withdrawal rates, spreading savings out over the long term to extend them throughout retirement,” said Peter J. de Silva, CEO of IRALOGIX. It points to a more instinctive, in-the-moment decision-making style, which could have significant long-term financial consequences. Optimally, retirees should have a more balanced approach, one that allows for some leeway but also safeguards long-term financial security by placing limitations around monthly savings withdrawals.”

Key Findings:

• 49% of retirees forego a formal withdrawal strategy, opting to take what they need as they go. 22% draw down their savings using a systematic process based on a fixed annual percentage; 17% spend only dividends and interest.

• 53% adjust their withdrawal strategies based only on changes in their personal lives or don’t make any adjustments at all.

• 46% say their 401(k) provider offered minimal or no resources on decumulation strategies as they approached retirement.

• 44% say inflation has minimal to no impact on their savings withdrawals. 31% note that inflation has some impact, but they haven’t made any major adjustments. 24% say inflation has a significant impact on their withdrawal strategies and they make adjustments based on it. 

• 32% say the biggest challenge in managing their retirement withdrawals is understanding all of the options available; 20% cite planning for healthcare or other unexpected costs; 20% say deciding how much to withdraw annually; 17% note managing taxes on their withdrawals. 

• 29% don’t have a strategy for adjusting their spending based on market performance, saying they don’t pay attention to how the market is doing. 24% stick to a fixed withdrawal rate regardless of market performance; 23% only adjust their spending under extreme market conditions; 23% adjust their withdrawals based on market performance.

Other Takeaways

• 53% of respondents tap Social Security before any other sources of savings or income. Other primary sources include pensions,19%, and 401(k) accounts and savings at 8% each.

• 39% say healthcare costs don’t play a significant role in their withdrawal strategies, while 37% note it is a significant or minimal factor.

• 32% say taxes play some role, but are not a major focus, in their savings withdrawal strategies. 28% cite taxes as having a significant role, and 18% haven’t considered taxes in their withdrawal plans.

• 31% maintain a 6-12-month cash reserve cushion to meet unexpected expenses; 29% keep more than 12 months; 25% don’t maintain a cushion.

• 30% don’t plan to change their spending patterns as they age and will keep their spending consistent throughout, 23% will increase their spending as healthcare needs arise, and 18% will increase their spending earlier in retirement, then decrease it later.

• 28% withdraw less than 3% annually to support their lifestyle.13% withdraw 4-5%, and 11% tap 5-6%.

“The findings show that while flexibility is valuable, there’s a clear need for guidance to help retirees navigte the complexities of decumulation,” said de Silva. “For many, the challenge isn’t just about deciding how much to withdraw, but also understanding the impact of taxes, healthcare costs, inflation, and unanticipated expenses on retirement savings. By making informed choices, retirees can feel more secure in managing both the expected and unexpected in retirement.”

Methodology

The survey was conducted online in October 2024 on behalf of IRALOGIX. Respondents, who skewed 52% female to 48% male, were drawn from a national sample of retirees with household incomes of $0 – $200,000-plus. To schedule an interview, or for a copy of the full survey results, please contact Scott Sunshine.

IRALOGIX, a leading retirement industry fintech provider, today announced the appointment of Tom Albergo as Chief Operations Officer. Albergo will assume his new position on December 2, report to Peter de Silva, Chief Executive Officer, and be a member of the Company’s Executive Leadership Team. Albergo succeeds Christine Skatchke, who is retiring at the end of December.

“We are excited to welcome Tom to the IRALOGIX team and are eager to leverage his experience, service orientation, and operational acumen to drive our continued growth,” said Peter de Silva. “With his extensive background in retirement operations, Tom is the perfect fit to help us achieve our growth, client experience, and operational goals. I am confident that his insights and contributions will be pivotal in accelerating our progress and strengthening IRALOGIX’s position as a leader in the retirement marketplace.”

“I am thrilled to join IRALOGIX as COO, especially at such a transformative time in the company’s journey. I look forward to shaping our operational strategy to deliver outstanding service to our customers and helping to shape and drive our business strategy through efficiency, innovation, and investments in our people.”

Most recently, Albergo served as Senior Vice President of Retirement Operations for Ascensus. He was responsible for growing business operations, driving process improvements, and enhancing line quality and service. He oversaw two retirement operating centers, two offshore service centers, and a $25 million P&L. Before Ascensus, Albergo held senior operations roles at ING.

 

IRALOGIX provides the tools and insights needed to streamline your IRA program costs and create a fee structure that enables your institution to remain competitive and responsive to client needs.

The fee structure for a financial institution’s IRA program plays a significant role in meeting both revenue and client retention goals. Balancing these sometimes competing interests is critical for a successful IRA program. The challenge lies in designing IRA fee structures that are transparent, ethical, and aligned with the institution’s goals and clients’ needs. Let’s explore how financial institutions can structure IRA fees to drive profitability while keeping clients engaged and loyal.

Understand IRA Fee Structures

IRA program sponsors, such as financial institutions, brokerages, trust companies and insurance companies, all charge different fees for their IRA offerings. The fees charged depend on the types of investments offered and the sponsor’s role in servicing the IRA program and account holders. Here are the types of fees typically charged for an IRA:

• Custodial fees for safekeeping assets, tax reporting and providing a trading platform
  • Administrative fees for recordkeeping, and account maintenance, reconciliation and statements
  • Management fees for overseeing the IRA program and/or selecting and monitoring the investments offered
  • Trading fees for each investment buy or sell order
  • Transaction fees for account holder transactions such as withdrawals or conversions
  • Paper fees for printing and mailing paper statements or other documents when clients elect a paper delivery option
• Investment advice fees for managed accounts or advisory services

Financial institutions typically apply these fees using one or more of these fee models:

• Asset-based fees offer scalable solutions reflecting the slide of a client’s portfolio
  • Tiered pricing based on account balance thresholds or service levels offer flexibility for various client segments
  • Flat fees do not change based on account balance or services provided, offering simplicity and predictability and appealing to clients seeking pricing structures that are easy to understand

Most IRA owners will not see all these fees itemized on their account statements. Some fees may not apply to an IRA program and most institutions bundle certain types of fees on the financial disclosure. This can make it difficult for account holders to determine how much they are paying for certain services or to compare IRA programs if the fees are not clearly explained.

Ethical Considerations

The IRA fee structure is crucial for maintaining credibility within the financial services market. While higher fees can increase revenue and profitability, they can also erode client trust if they’re hidden or mischaracterized. Financial institutions must ensure that their IRA fees reflect the value delivered and do not create potential conflicts of interest. Transparent fee practices can distinguish a firm from its competitors, fostering a reputation for integrity and reliability. Key considerations for ethical IRA fee structuring include

• • Clear explanations of fees and services, and how they will be applied,
  • Pricing that is reasonable and commensurate with the services provided, and
  • Regular reviews of fee practices considering market conditions, business goals, and client feedback.

Strategies for Maintaining Profitability in a Competitive Market

Put simply, profitability depends on effectively structuring fees to cover more than just the actual costs of operating the IRA program. The costs can include paying for recordkeeping technology and software, print and mailing services, compliance and legal services, and staff compensation and training. These internal costs can easily increase to the point where an IRA program is no longer profitable or can only be offered to account holders with balances large enough to warrant higher fees.

Upgrading technology is one way to reduce some of these costs in the long term, but that typically requires a large up-front investment. New technology alone is not the answer. A competitive IRA program still requires the right features, pricing and staffing to align with client needs and market dynamics.

Another strategy for maintaining a competitive IRA program is offering value-added features that don’t significantly increase internal costs. At a minimum, account holders want a secure, user-friendly online experience for managing their IRAs. But many account holders (and advisors) are now also seeking low-cost investments, rather than retail pricing, for rollover IRAs as a result of regulatory initiatives. It’s the additional features, such as personalized investment or draw-down advice, that enhance the perception of value. Many financial institutions, large and small, don’t have the internal bandwidth or funding to build, maintain and update all the facets required for a competitive IRA program.

As a result, an effective strategy is to partner with a provider that enables the financial institution to enhance its IRA program without increasing internal costs or compromising on services or fee transparency.

Achieve the Right Balance with IRALOGIX

IRALOGIX offers a cloud-native, white-labeled IRA recordkeeping platform that integrates seamlessly with a financial institution’s brand and website. Our online, paperless service includes compliance expertise, a friendly, knowledgeable customer care center, custody, trading, and personalized IRA features. We strive to keep our recordkeeping fees low, and we offer institutional share class investments with no trading fees, aligning with our mission to make retirement saving and investing accessible to everyone, regardless of account balance. We charge a base fee for recordkeeping and compliance services and enable financial institutions to set their own fees using tiered pricing and asset-based fee models.

By embracing innovative outsourced solutions, like IRALOGIX, financial institutions can enhance the value of their IRA programs and retain their clients, without increasing in-house costs and still maintain fee integrity. If you’re interested in optimizing your IRA program and elevating client satisfaction, reach out to us. Together, we can transform these opportunities into lasting growth.