In its second time in as many years there has been legislative changes that will have an impact on the retirement planning landscape. Accompanying the Tax Cuts and Jobs Act of 2017 which was signed into law on December 22, 2017, the Secure Act which congress passed on December 19, 2019, has brought several significant changes. While there will be quite a bit of information that will be available over the coming months here are some of the key provisions you should be familiar with now.
1. Raising the required minimum distribution (RMD) age from 70 ½ to 72 (applying to anyone who has not turned 70 ½ by the end of 2019).
2. In the same breath, the age limit restriction on traditional IRA contributions has been removed (this was previously prohibited starting at age 70 ½).
3. Qualified Charitable Distributions (QCDs) are still allowed at 70 ½. This will provide for a key window of time (1 ½ years) in which RMD’s will not be required, but can still take advantage of QCDs.
4. Allowing Americans who just had a baby (or adopted a child) to take withdrawals of up to $5,000 from their retirement accounts including a 401(k) or IRA, without incurring the 10% penalty.
5. Allowing up to $10,000 of a 529 savings plan to be used to pay off student debt over the lifetime of the plan. An additional $10,000 can be used for each plan beneficiary.
6. One of the most impactful changes is the end of the inherited IRA, otherwise known as the “Stretch IRA”. Beneficiaries are now required to draw down the account and pay taxes on their withdrawals over 10 years instead of over their lifetime.
While there are many more changes to note than those listed above, these are certainly the most important to mention. The changes are not nearly as sweeping as the Tax Cuts and Jobs Act of 2017. However, the SECURE act of 2019 makes many updates which will certainly provide for not only more planning opportunities, but will add complexity to your current retirement plan. Now is a great time for those who have not started planning to schedule an appointment to get a good “check-up” and for our current clients to review your existing plans. Keep an eye out for more information as we continue to share all of the changes and pertinent information.
Tri-County Times also ran this article of Kyle's. Check it out at this link! https://www.tctimes.com/news/secure-act-of/article_0548df04-3198-11ea-b7a3-d7ccd7963137.html
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Written by Kyle Cooper.