The SECURE ACT
Just this past month congress passed the SECURE act, which is one of the biggest rule changes I have seen to retirement planning since I began in the industry. In total it is the right direction to help and incentivize people to plan for their futures, but more will definitely need to be done. Here is a quick list of some changes that may affect you:
- Opened up rules on multiple employer plans (MEPs) that allow unrelated businesses to come together to start a retirement plan which could lower overall costs. Goes into effect beginning of 2021.
- Tax credit for employers with less than 100 employees who start an employer sponsored plan increases to $5,000 for the first 3 years. Also allows for an additional $500 credit for autoenrollment.
- Allows up to a $5,000 distribution from retirement plans for birth or adoption purposes without a penalty.
- Increases the required minimum distribution (RMD) age to 72. Unfortunately, if you have already turned 70.5 in 2019 then you must continue to take an RMD.
- Non-spouse beneficiaries of a qualified account must take all the money out of the account within 10 years. This goes into effect with any owner who dies in 2020 or later. This eliminates a strategy known as the stretch IRA, which allowed beneficiaries to take distributions over their lifetimes.
- Contributions can now be made to traditional IRAs even after age 70.5.
- 529 plans can now be used to repay up to $10,000 in student loans.
This is not an exhaustive list of changes or details so make sure you discuss with your advisors before taking any action.