You may have received a memo from us regarding the SECURE Act over the past several weeks. In case you missed it, we wanted to give you a quick breakdown of what the SECURE Act is and why you should be paying attention. On January 1, 2020 The SECURE Act went into effect. The SECURE Act stands for “Setting Every Community Up for Retirement Enhancement.” The SECURE Act was passed because Americans are living longer and working past the traditional retirement age. In the simplest terms, this act is trying to strengthen retirement security so there is more available retirement savings to Americans later on. While there are 29 provisions, here are the 5 top that may interest and affect you the most…
- It increases the age of distribution from 70.5 to 72 years old
- People who are expected to turn 70.5 years old in 2020 will not be required to withdraw until they are 72. The first withdrawal doesn’t need to be made until the following April 1, 2021. People who turned 70.5 in 2019 needed to withdraw by April 1, 2020. This basically means that the rules governing required minimum distributions (RMDs) for traditional IRA holders will be similar to those with Roth IRAs and 401(k)s.
- Eliminates age restrictions to contribute
- Beneficiaries must withdraw all of the balance of the retirement account within 10 years.
- Exceptions are a surviving spouse, minors, a disabled beneficiary, and beneficiaries who are less than 10 years younger than the original account holder
- It is important to note that beneficiaries of an IRA or 401(k) are not required to make any changes if the original owner passed away prior to January 1, 2020.
- Acceleration of income tax due to the 10-year window to taking distributions
- Expanded benefits for part time employees to contribute to a 401(k)
Long-term and part-time workers will now be eligible to enroll in their company’s 401(k) plans. Under previous rules, those who worked less than 1,000 hours per year were not eligible to participate in these employer-sponsored retirement accounts. The SECURE Act requires employers to offer a 401(k) to any employee who works more than 1,000 hours per year, or 500 hours over 3 consecutive years.
Your estate planning goals likely include more than just tax considerations. You might be concerned with protecting a beneficiary’s inheritances from their creditors, future lawsuits, and a divorcing spouse. If you have an IRA, are planning to leave an IRA to a loved one or you have inherited an IRA, we can help you revisit your retirement and estate planning strategies. In order to protect your hard-earned retirement account and the one’s you love, its critical to act now. Give us a call to discuss how your estate plan and retirement accounts might be impacted by the SECURE Act. When you consult us, you can rest assured your retirement and estate plan will be ready for the SECURE Act.