The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 has officially been approved by the Senate.
The SECURE Act is part of the 2019 year-end appropriations act and tax measure which was created in an effort to increase accessibility to retirement plans and tax-advantaged accounts. Each year, more and more Americans are outliving their assets and the SECURE Act has attempted to help individuals better prepare for retirement with some expanded options. The SECURE Act has modified quite a few of the rules regarding retirement plans as well as how you are able to leave assets to your heirs.
For those who are already enrolled in a retirement plan or tax-advantaged account, the Act extends the age at which retirement plan participants need to take required minimum distributions (RMDs), from 70½ to 72. This gives you more time to let your investments grow if you don’t need that money yet. This only applies to people who turn 70½ in 2020.
• IRA Contributions:
Starting in 2020, you can also continue to contribute to a traditional IRA past the age of 70½ if you are still earning income.
• Student Loans:
SECURE allows the use of tax-advantaged 529 account fund to repay qualified student loans up to $10,000 annually.
• Family Costs:
The SECURE Act grants penalty-free withdrawals from 401(k) accounts of up to $5,000 to help cover the costs of having or adopting a child.
• Limitations on IRA Beneficiaries:
The ‘stretch’ distribution option used to allow non-spousal beneficiaries to receive their distributions stretched out over their lifetime. This is now altered to a 10-year period limit on receiving your distributions except for spouses and disabled beneficiaries. Beneficiaries who are minors are also excepted from the rule until they reach the age of majority when the 10-year period time limit will begin.
The SECURE Act makes having employee retirement plans easier to administer by increasing the automatic enrollment for employees cap from 10% to 15% of wages. The Act increases the maximum tax credit for small businesses starting a new retirement plan to $5,000 for up to three years depending the number of non-highly compensated employees eligible. It also helps to lower the cost to employers by providing a maximum tax credit of $500 per year to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment and gives more options to include annuities in 401(k) plans. The Act also makes retirement funds more accessible by allowing long-term, part-time workers to be eligible to participate in an employer retirement plan.
Speak with one of our advisors about how we can help you prepare for your retirement or plan for your estate to be passed on to your family.
None of the information in this document should be considered as tax advice. You should consult your tax advisor for information concerning your individual situation.