The Passage of the SECURE ACT and what this new law may mean to you

| December 27, 2019
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As a follow up to my blog on May 29th, 2019 the Setting Every Community Up for Retirement Enhancement Act (SECURE) has passed both houses of Congress and was signed into law by President Trump on December 20th

What follows is a summary of some of the more important provisions, both good and bad:  

  • For those turning 70 ½ after 2019, required minimum distributions (RMD’s) will now wait until age 72.

  • Contributions may still be made to Traditional IRA’s for those that have earned income after the age of 70 ½.

  • Starting in 2021, part-time workers with a minimum of 500 hours per year for at least 3 consecutive years and reach age 21 by the end of the 3-year period will be able to save for retirement.
  • If you have a 401(k), IRA or other retirement account, the new law allows up to a $5,000 withdrawal (early withdrawal penalty-free) for birthing or adoption costs- under certain conditions. For married couples, each spouse may withdraw $5,000 from their own account penalty-free.

  • Small businesses seeking to offer retirement plans will be assisted by the addition of three provisions.
    1.  The new law increases the tax credit available to 50% of start-up costs with a maximum credit up to $5,000. 
    2. An additional credit of $500 either for new plans or existing plans that add auto-enrollment.
    3. Beginning 2021, unrelated employers of small business may participate in a multiple-employer plan and have a common plan administrator to help potentially    reduce administrative costs. 

  • A new provision added will allow fellowships, stipends or other benefits to aid graduate or post-doctoral study or research to be treated as compensation allowing the recipient to make IRA contributions.

  • “Stretch, Beneficiary or Inherited” IRA’s eliminated!  The current rules that allow non-spouse IRA beneficiaries to “stretch” the required minimum distribution (RMD) from an inherited account over their life expectancy with the possibility of funds growing tax-deferred for years, have been eliminated.  Funds from a non-spouse inherited IRA generally must be distributed within 10 years of the IRA owner’s death.  These rules also apply to 401(k) accounts and other defined contribution plans.

    The elimination of the Stretch IRA will impact financial planning regarding beneficiary designations, legacy planning and tax-management.  RZ Wealth will be attending  seminars and study groups in order to determine how to best leverage the new law for the benefit of our clients and we will also work with estate planners and attorneys in regard to aligning assets strategically to the advantage of clients and their financial goals.  As always, RZ Wealth is here to serve you and provide the  education and strategy needed in the pursuit of your needs and objectives. 

For further information you may reference the following link from the House Committee on Ways & Means that lays out the various provisions and sections of the new law:

https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE%20Act%20section%20by%20section.pdf

 

*RZ Wealth is not a tax advisor.  All decisions regarding the tax implications of your investments should be made in consultation with your independent tax advisor.  RZ Wealth does not provide tax or legal advice. 

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