Wednesday, 22 January 2020 17:35
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was signed into law by President Donald Trump on December 20, 2019. What does it mean to you?
The information below covers what The Secure Act includes and how the provisions may affect you and your retirement plans.
Delayed Age for RMDs
The age for when required minimum distributions (RMDs) must begin has increased from age 70½ to age 72. This applies to anyone who turns 70½ after December 31, 2019. For anyone over age 72, payments from an employer plan may still be deferred until retirement. What this means to you: You can delay those pesky forced distributions a year and a half.
IRA Contributions Past Age 70½
For contributions made for tax years beginning after December 31, 2019, the Secure Act repeals the prohibition of contributions to a traditional IRA by an individual who has attained age 70½. Contributions for prior years (including 2019 contributions made by April 1, 2020) are still not allowed if the owner was age 70½ or older during the year. What this means to you: You can keep stuffing more money into your IRA!
For IRA owners who die after December 31, 2019, distributions to beneficiaries are generally required to be distributed by the end of the 10th calendar year following the owner’s death. This applies to beneficiaries who are someone other than the surviving spouse, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the owner, or a child of the owner who has not reached the age of majority. What this means to you: No more Stretch IRAs.
Annuity Safe Harbor
The Act has other provisions that make it easier for retirement plans to offer annuity options, including a requirement that plan sponsors must annually disclose on 401(k) statements an estimate of the monthly payments a participants would receive if their total account balance were used to purchase an annuity for the participant and the participant's surviving spouse. What this means to you: Your statements will hopefully show you how an annuity can provide you with a guaranteed income for life, very much like a pension plan. The model disclosure is still a work in progress, so keep your fingers crossed that they don't drop the ball on this one.
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