On December 20th, 2019 the Setting Every Community Up for Retirement Enhancement (SECURE) Act – was signed into law, representing the most extensive changes to retirement legislation in over a decade.
One of the primary objectives of the SECURE Act is to help Americans save for retirement – and many of the new rules and provisions reflect that including:
- Required Minimum Distributions (RMDs) will now start at age 72 (instead of 70½)
- IRA contributions can be made after age 70½ as long as there is earned income
- Part-time employees may now be eligible to participate in their company-sponsored retirement plan
In addition, the Secure Act also:
- provides several tax credits to encourage business owners to set up company-sponsored retirement plans and/or add an auto-enroll feature,
- permits individuals to access money in their 401(k) plans or IRAs penalty-free to help pay for the birth or adoption of a child, and
- permits the use of invested assets in a 529 college savings plans to be used to for student loan repayments (up to $10,000) and costs associated with apprenticeships.
One key change in the SECURE Act is how non-spousal beneficiaries will receive money from inherited qualified retirement accounts. Under the old law, beneficiaries could take RMDs over the course of their expected lifetime – thereby stretching out the benefits and controlling the taxes – a practice we wrote about here. Under the new law, most non-spousal beneficiaries of a qualified retirement account no longer have to take RMDs – but the entire account must be distributed within 10 years of being inherited. The impact of this new provision is that beneficiaries should engage in careful planning on the timing of their distributions from inherited IRAs.
For a more detailed look at the key reforms in the SECURE Act, please see the attached article from the AICPA. You can also listen to our recent podcast on the SECURE Act here.
Ultimately, the SECURE Act will impact all aspects of planning – financial, tax and estate – and it’s important to work with your financial advisor, your CPA and your attorney to ensure that not only are you compliant with the new legislation, but that you are maximizing the benefits offered. As always, our goal is to provide you with financial clarity and peace of mind so please reach out with any questions about how the SECURE Act might impact you.
The information in this communication should not be considered investment advice to you, nor an offer to buy or sell any securities or financial instruments. The services, or investment strategies mentioned above may not be available to, or suitable, for you. Consult a financial advisor or tax professional before implementing any investment, tax or other strategy mentioned herein. All investments may lose money.