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SECURE Act can affect your retirement planning

SECURE Act can affect your retirement planning

February 04, 2020
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“New year, new me.” You’ve probably heard the phrase. It seems like human nature to use the early part of the calendar year to reassess our lives and commit to changes that will bring about more positive outcomes. If you are like most people, you made a pledge to exercise more, save more money, lose weight, or focus on spiritual growth. Those are all great goals and we wish you good luck with them!

This year though, there is a resolution being made in the financial industry that will impact nearly everyone and it has a catchy name: The SECURE Act (yes it’s an acronym: Setting Every Community Up For Retirement Enhancement). It is a broad piece of retirement legislation and its effects will be felt beginning this year. Here are some highlights: 

  • Required Minimum Distributions – In the past, once you hit age 70 ½, you were required by law to begin taking money from your retirement accounts. For those who have not hit 70 ½ by the end of 2019, your new start date is age 72.
  • Annuities in Retirement Plans – Employers will be encouraged to offer lifetime payment options to employees via annuities.
  • Changes to Inherited IRAs – Up to now, when a non-spouse beneficiary inherited someone else’s retirement account, they had the option of “stretching” the tax liability of the retirement account over their life expectancy. Now, that same beneficiary will have to distribute the assets within 10 years of the date of death of the account owner.
  • Distributions to cover birth/adoption expenses – Beginning this year, each parent can distribute $5000 from their retirement accounts without incurring the normal 10 percent penalty in the year a child is born/adopted.
  • 529 Student Loan repayments – The popular section 529 college savings plans will now be usable up to the amount of $10,000 to repay student loans for the account beneficiary.

The good news about these changes are that most of them beneficially affect you. As always, you should discuss these changes with your financial and tax advisors to see how they impact you directly.

Best of luck in 2020!

This post was originally printed in the L'Observateur on January 22, 2020.