https://www.retirementplanningscottsdale.com/2020/01/08/anil-vazirani-scottsdale-financial-advisor-reports-how-the-secure-act-affects-your-retirement-accounts/ Anil Vazirani Scottsdale Financial Advisor reports How the SECURE ACT affects your Retirement Accounts.
Key takeaways—The SECURE Act:
As part of a larger government spending package, which was signed into law on December 20, 2019, Congress included provisions from the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The act includes many common-sense, long-overdue reforms that could make saving for retirement easier and more accessible for many Americans.
The important retirement legislation reflects policy changes to defined contribution plans (such as 401(k)s), defined benefit pension plans, individual retirement accounts (IRAs), and 529 college savings accounts. Most provisions in the law go into effect on January 1, 2020.
Here’s a summary of key provisions of the SECURE Act:
Required minimum distributions (RMDs) now begin at age 72
Next step: If you are turning 70½ in 2020 and had planned on taking an RMD, you may want to work with your financial advisor to reconsider your withdrawal plans.
You can make IRA contributions beyond age 70½
Next step: Work with your financial advisor to determine your retirement readiness, how long you plan to work, and when you expect to start withdrawing from your retirement savings. This change doesn’t apply for tax year 2019, as it will begin for tax year 2020 contributions. You can make your tax year 2020 contribution up until April 15, 2021.
Long-term, part-time workers will be able to join their company’s 401(k) plan
Next step: If you work part-time and haven’t been eligible to participate in a 401(k) to date, ask your employer or HR department how and when you can enroll.
Inherited IRA distributions generally must now be taken within 10 years
Next step: If you have an IRA that you planned to leave to beneficiaries based on prior rules, consider working with your tax advisor or estate planning attorney, as this change may require you to reevaluate your retirement and estate planning strategies. If you’re a beneficiary of an inherited IRA or 401(k) and the original owner passed away prior to January 1, 2020, you don’t need to make any changes.
Small-business owners can receive a tax credit for starting a retirement plan, up to $5,000
Next step: If you’re a small-business owner and have not yet established a retirement plan for your employees, consider taking advantage of the new credit to establish a retirement plan.
Small-business owners will find it easier to join together to offer defined contribution retirement plans
Next step: If you’re a small-business owner and have not yet established a retirement plan or would like to make changes to your plan that may make it easier to implement, consider taking advantage of the new law by joining a multiple employer plan, which will be available in 2021. If you’re a small-business employee whose employer is currently unable to offer a plan, consider letting your employer know about this new opportunity.
You can withdraw up to $5,000 per parent penalty-free from your retirement plan upon the birth or adoption of a child
Next step: Consider taking advantage of this provision if you do not have ample personal savings to fully fund the birth or adoption of a child.
529 funds can now be used to pay down student loan debt, up to $10,000
Next step: If your family’s 529 plans have money left over after you pay for college expenses, consider using the remaining money to help pay off student loans.
There are other changes that could impact workplace retirement savings plans. The SECURE Act:
Anil Vazirani is president of Secured Financial Solutions, independent insurance advisor investment advisor rep with a fiduciary obligation and in the financial services industry since 1994. A+ rating with the Better Business Bureau for over a decade and a half, members in good standing with the National Association of Insurance and Financial Advisors.
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