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What Is The SECURE Act?

February 6, 2020

In late December of 2019 Congress passed a bill called the SECURE Act. It stands for Setting Every Community Up for Retirement Enhancement, and both sides of Congress were for this bill and it passed. And there are some key changes that are gonna affect your retirement that you need to be aware of if you aren’t already.

One of the key changes is that our RMDs (Required MinimumDistributions) those ages are now bumped from, bumped back from, seventy and a half to age seventy two. So if you aren’t already taking RMDs in 2019, or you weren’t already seventy and a half in 2019, and you’re turning seventy and a half in 2020, or at some future year, you can defer those mandatory distributions to age 72. That’s a good thing, you know! You can defer those accounts for another 18 months, which can be helpful.

Not so helpful for a non-spousal beneficiary – children and grandchildren – anybody other than a spouse. In the prior code and rulings if you were a non-spousal beneficiary, you were able to stretch out those RMDs over their, over your lifetime and now not so much. A non-spousal beneficiary will have to deeply withdrawal the entire TSP 401k or IRA out over a ten-year period of time. Imagine what that could do to your kids or grandchildren’s tax brackets in those high peak earning years. So you’ll see some different estate planning techniques, I think, inputted to help people deal with those tax situations.

A couple other key changes. You are now able to contribute to traditional IRAs past age seventy and a half if you’re working. Prior the Roth IRA was the only retirement account you could contribute to past seven and a half other than your own retirement employer plan if you were working; and now traditional IRAs, you’re allowed to contribute to those accounts as well past seven and a half.

Finally one of the other key changes in this newSECURE Act is that you’re going to see a lot of employers starting to offer annuities inside 401k and employer sponsored plants. In the past you would see these offerings sometimes in the school and educational systems but very few 401k and employer plans offered annuities in 401ks. You’re gonna see that more now because Congress is really trying to help Americans retire as successfully as possible. Annuities obviously can generate income for people in retirement and we need income now more than ever before.

So those are the key changes when it comes to the SECURE Act. If you have any questions, please feel free to call us or email us, with how these changes can affect your own retirement.

Call us and set up a time for an exploratory meeting to learn more about how these affect your own retirement.