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 Dec. 22, 2017, the Secure Act, which congress passed Dec. 19, 2019, has brought several significant changes. SECURE Act is also known as “Setting Every Community Up for Retirement Security Act.”
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:
• Raising the required minimum distribution (RMD) age from 70½ to 72 (applying to anyone who did not turn 70½ by the end of 2019).
• In the same breath, the age limit restriction on traditional IRA contributions has been removed (this was previously prohibited starting at age 70½).
• Qualified Charitable Distributions (QCDs) are still allowed at 70½. This will provide for a key window of time (1½ years) in which RMDs will not be required, but can still take advantage of QCDs.
• 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-percent penalty.
• 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.
• 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 to review their existing plans.