• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Services
    • Services Overview
    • Financial Planning
    • Retirement Strategies
    • Investment Management
    • How We Work
  • Blog
  • Resources
    • 2018 Tax Rates
    • 2019 Tax Rates
  • About
    • About
    • Fiduciary Oath
    • Location
  • Contact

Retegy

Save Money on Taxes, Invest the Difference, Retire Happy!

  • Home
  • Tax Strategies
  • Investing
  • Financial Planning
  • Retirement

The SECURE Act

January 21, 2020 By Retegy

Long-established retirement account rules change.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act is now law. With it, comes some of the biggest changes to retirement savings law in recent years. While the new rules don’t appear to amount to a massive upheaval, the SECURE Act will require a change in strategy for many Americans. For others, it may reveal new opportunities.

Limits on Stretch IRAs. The legislation “modifies” the required minimum distribution rules in regard to defined contribution plans and Individual Retirement Account (IRA) balances upon the death of the account owner. Under the new rules, distributions to non-spouse beneficiaries are generally required to be distributed by the end of the 10th calendar year following the year of the account owner’s death.1

It’s important to highlight that the new rule does not require the non-spouse beneficiary to take withdrawals during the 10-year period. But all the money must be withdrawn by the end of the 10th calendar year following the inheritance.

A surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and child of the IRA owner who has not reached the age of majority may have other minimum distribution requirements. 

Let’s say that a person has a hypothetical $1 million IRA. Under the new law, your non-spouse beneficiary may want to consider taking at least $100,000 a year for 10 years regardless of their age. For example, say you are leaving your IRA to a 50-year-old child. They must take all the money from the IRA by the time they reach age 61. Prior to the rule change, a 50-year-old child could “stretch” the money over their expected lifetime, or roughly 30 more years.

IRA Contributions and Distributions. Another major change is the removal of the age limit for traditional IRA contributions. Before the SECURE Act, you were required to stop making contributions at age 70½. Now, you can continue to make contributions as long as you meet the earned-income requirement.2

Also, as part of the Act, you are mandated to begin taking required minimum distributions (RMDs) from a traditional IRA at age 72, an increase from the prior 70½. Allowing money to remain in a tax-deferred account for an additional 18 months (before needing to take an RMD) may alter some previous projections of your retirement income.2

The SECURE Act’s rule change for RMDs only affects Americans turning 70½ in 2020. For these taxpayers, RMDs will become mandatory at age 72. If you meet this criterion, your first RMD won’t be necessary until April 1 of the year after you reach 72.2

Multiple Employer Retirement Plans for Small Business. In terms of wide-ranging potential, the SECURE Act may offer its biggest change in the realm of multi-employer retirement plans. Previously, multiple employer plans were only open to employers within the same field or sharing some other “common characteristics.” Now, small businesses have the opportunity to buy into larger plans alongside other small businesses, without the prior limitations. This opens small businesses to a much wider field of options.1

Another big change for small business employer plans comes for part-time employees. Before the SECURE Act, these retirement plans were not offered to employees who worked fewer than 1,000 hours in a year. Now, the door is open for employees who have either worked 1,000 hours in the space of one full year or to those who have worked at least 500 hours per year for three consecutive years.2

While the SECURE Act represents some of the most significant changes we have seen to the laws governing financial saving for retirement, it’s important to remember that these changes have been anticipated for a while now. If you have questions or concerns, reach out to your trusted financial professional.

Provided by Retegy LLC

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE%20Act%20section%20by%20section.pdf  [12/25/19]
2 – marketwatch.com/story/with-president-trumps-signature-the-secure-act-is-passed-here-are-the-most-important-things-to-know-2019-12-21 [12/25/19]

Filed Under: Retirement

Primary Sidebar

Market Update

Market Update Image

Market Update (January 2021)

  • Email
  • Facebook
  • LinkedIn
  • Twitter

Recent Posts

  • Market Update (January 2021)
  • End-of-the-Year Money Moves. 2020 Edition
  • Market Update (December 2020)
  • Market Update (November 2020)
  • 2021 Limits for IRAs, 401(k)s and More
  • Why Roth IRA Conversions May Now Be Advantageous
  • FAFSA Applications Are Now Open
  • Market Update (October 2020)
  • Market Update (September 2020)
  • Market Update (August 2020)

Featured

year end image

End-of-the-Year Money Moves. 2020 Edition

By Retegy

401k, IRA Savings

2021 Limits for IRAs, 401(k)s and More

By Retegy

Magnified Roth IRA

Why Roth IRA Conversions May Now Be Advantageous

By Retegy

More Posts from this Category

Footer

Social

  • Email
  • Facebook
  • LinkedIn
  • Twitter

Legal

Disclosures

Privacy Policy

Our Office

200 Spectrum Center Drive, Suite 300
Irvine, CA 92618
Get directions
(949) 662-3212
info@retegy.com

Navigation

  • Featured
  • Financial Planning
  • Investing
  • Market Update
  • Retirement
  • Tax Strategies

Copyright © 2021 Retegy LLC. All Rights Reserved. Retegy LLC is a Registered Investment Advisor.

Retegy LLC is a registered investment advisor offering advisory services in the State of California and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Retegy LLC in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or under an applicable state exemption.

The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible under applicable laws, Retegy LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose. Retegy LLC does not warrant that the information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Retegy LLC be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Retegy LLC or a Retegy LLC authorized representative has been advised of the possibility of such damages. In no event shall Retegy LLC have any liability to you for damages, losses, and causes of action for accessing this site. Information on this website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.

 

ADA Compliance Policy: Retegy LLC is committed to keeping our site compliant with the Americans with Disabilities Act. We welcome feedback on how to improve our site to make it accessible to everyone.