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What the SECURE Act Means for You

CFP Financial Advice Financial Planner Financial Planning Financial Services Investment Advisor Kids Financial Registered Investment Advisor Retirement Planning RIA Tax Planning Wealth Management December 30, 2019 Author: Deborah Doyle

As of January 1, 2020, many changes from The SECURE Act will become effective. Some of the more notable changes that could impact your financial future involve the following:

Major Changes by New Law:

  • Required Minimum Distributions (RMDs) Start at 72, not 70 ½
  • Traditional IRA Contributions After 70 1/2
  • Inherited Retirement Accounts
  • Adoption/ Birth Expenses
  • Changes in 529 Plans

RMDs Starting at 72: The new law only applies to the people who turn 70 ½ after December 31, 2019. So, if someone turned 70 ½ in 2019, the person must take their RMD in 2019 and beyond.

Traditional IRA Contributions After 70 1/2:  The law puts an end to the restrictions on individuals contributing to an individual retirement account (IRA) after 70 1/2. If individuals have earned income, they may continue the contributions

Inherited Retirement Accounts: Inherited Retirement Accounts, sometimes known as “Stretch IRAs”, can be used to distribute assets over the beneficiary’s lifetime. Due to the recent changes, those assets must be distributed within 10 years of inheritance. There are still exceptions for spouses, minor children, disabled individuals and those less than 10 years younger than the decedent. This change will only impact accounts inherited starting in 2020, not existing inherited accounts.

Adoption/ Birth Expenses: The new law allows for new parents to withdraw up to $5,000 from an IRA or employer sponsored plan penalty-free. These withdrawals can be used to pay for related expenses through the first year after birth or adoption. Taxes will still be paid on the pre-tax contributions, but no penalties will apply to the withdrawals.

Expanding 529 Plan Savings: Recent changes expand what a 529 savings plan can cover. These plans can now cover homeschooling, private elementary, secondary or religious schools. It also allows individuals can now use assets in college-saving plans to repay up to $10,000 in qualified student loans.

What are the next steps you should take?

  • Individuals who turned 70 1/2 prior to December 31, 2019 will continue to take their required minimum distributions as they have been.
  • Individuals who have estate plans that include leaving retirement accounts to their successors should consider reviewing those plans and have a conversation with a financial planner, tax advisor, and attorney to determine whether any changes would be suitable.
  • Individuals who are older than 70 1/2 with earned income should meet with a tax advisor and financial planner to decide whether Traditional IRA contributions would be beneficial for their financial situation.

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The opinions voiced in this material are for informational purposes only and are not intended to provide specific advice to any individual.  Consult your legal, tax, and/or financial advisor to determine what is appropriate for your situation.

As a Registered Investment Advisor (RIA), Partnership Wealth Management is committed to providing our clients with financial planning and wealth management services to help them work towards their financial goals. At Partnership Wealth Management, we have a long history of working with the LGBT community. Among the many services we offer are financial planning and estate planning strategies for gay and lesbian couples. Financial planning is an important part of preparing for the future; contact us today to get started: www.partnershipwm.com.