6 Things You Should Know About the New SECURE Act
You may have heard about the Setting Every Community Up for Retirement Enhancement (SECURE) Act that was passed at the end of 2019, as it is the most significant retirement-related legislation in more than a decade. We have summarized the key measures as they may affect you in 2020 or the foreseeable future.
1. You can wait until age 72 to take required minimum distributions from IRAs: The new age threshold applies to individuals who reach age 70½ in 2020 or later. Those who turned 70½ in 2019 will not be able to take advantage of the new law and will have to continue taking the required minimum distributions from their retirement accounts.
2. 10-year distribution rule for inherited IRAs: It used to be that when you inherited an IRA from anyone other than a spouse, you had the option to take out or “stretch” the required distributions over your own life span rather than that of the original owner thus delaying the vast majority of taxation. The SECURE Act eliminated the “stretch” provisions and requires non-spouse beneficiaries of IRAs to distribute the entire account assets within the 10th year following the year of inheritance. We are already seeing the major implications of this change, as it requires diligent tax planning.
3. You can now contribute to traditional IRA past the age of 70½: Contributions to traditional IRAs by those aged 70½ or older are now permitted if employment income is still coming in.
4. Make penalty-free IRA withdrawals to help with the birth or adoption of a child: New parents may take $5,000 per person in penalty-free withdrawals from retirement accounts to help with birth or adoption related expenses. That means a couple can withdraw $10,000 per child to help offset these costs.
5. Expanded eligible expenses for 529 college savings accounts: 529 college savings accounts may now be used to pay for certain student loan expenses up to a $10,000 lifetime maximum as well as certain apprenticeship program expenses. The act makes these changes retroactive to distributions made after December 31, 2018.
6. New incentives for small-business retirement plans: The SECURE Act significantly increased the tax credit for small business implementing a new retirement plan to $250 for each non-highly compensated employee who is eligible to participate in the plan, up to a max of $5,000 a year. The credit is available for SIMPLEs, SEPs and 401(k) plans.
This content is developed from sources believed to be providing accurate information, and provided by Criteron Capital and Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.