The SECURE Act: What’s changed?

SCROLL

At the end of 2019, The SECURE Act was passed by the Senate and signed into law by President Trump.

The ‘Setting Every Community Up for Retirement Enhancement’ (SECURE) Act was created to help improve retirement security by making saving for retirement easier and more accessible to many Americans. The law also helps increase access to tax-advantaged accounts and attempts to prevent older Americans from outliving their assets.

Why change?

The retirement system in the U.S. has not seen any big changes since 2006. According to data from the U.S. Bureau of Labor Statistics published in 2018, only 55% of the adult population participate in a workplace retirement plan and most are often behind when it comes to investing part of their paycheck.

In 2019, Vanguard stated that the median 401(k) balance for those 65 and older is $58,035. That’s quite a shocking number.

U.S. Representative Richard Neal, chairman of the Ways and Means Committee exclaims, “With [the] passage of this bill, the House made significant progress in fixing our nation’s retirement crisis and helping workers of all ages save for their futures.”

What are the key changes and how do they affect your situation?

Stretch IRA’s

The SECURE Act eliminates the Stretch IRA provision, which allowed an inherited IRA account to be distributed over a lifetime. Under the new law, retirement account owners who pass away after January 1, 2020, beneficiaries are required to withdraw assets in an inherited IRA or 401(k) within 10 years. There are some exceptions including a surviving spouse, minor children, disabled and chronically ill beneficiaries and beneficiaries who are up to 10 years younger than the IRA owner.

Ages Limits

The SECURE Act changed the Required Minimum Distribution (RMD) and the IRA contribution ages. RMD’s are now required to begin in the year an individual turns 72 years old. Before the Act, workers with an individual retirement account used to only be able to contribute up until age 70 ½. Individuals who have already begun taking their RMD are to stay on their current schedule.

The act also eliminates the IRA contribution age limit and allows any individual, no matter the age, to contribute to an IRA as long as they have earned income.

Student Loans

The SECURE Act expanded the ‘Qualified Higher Education Expenses’ to include Education Loan Repayment. Individuals can now use $10,000; in their lifetime, from a 529 account to pay off student loans for the 529 account’s beneficiary.

Other changes include:

  • Qualified Charitable Distributions (QCD) are still allowed starting at age 70 1/2
  • Creates a tax credit for small businesses establishing a 401(k) (or a 403(b), SEP IRA or SIMPLE IRA)
  • Creates a tax credit for the adoption of auto-enrollment of participants in 401(k) plans
  • Allowance of qualified Disaster Distributions up to $100,000 per disaster, from retirement accounts
  • Allowance of mortgage insurance premium deduction
  • Deduction for qualified tuition and related expenses
  • AGI “hurdle rate” for deducting qualified medical expenses remain at 7.5%
  • Miscellaneous incentives for economic growth, energy production and green incentives

Meet with your advisor

If you could inherit a 401(k), IRA or other retirement accounts from anyone other than your spouse, you are likely going to be affected by the SECURE Act. You may need to adjust how much you withdraw annually as compared to the previous rules. This is expected to increase the number of taxable distributions and result in higher tax revenue for the government.

Those doing estate and retirement planning need to understand the tax impact of leaving your IRAs and 401(k)s to your beneficiaries as the rules will significantly affect them.

Verdant Wealth is prepared to educate and assist you in navigating your financial future. Schedule a consultation today.

Learn more about Verdant Wealth.


Verdant Wealth Management is a d/b/a of Nelson, Van Denburg & Campbell Wealth Management Group, LLC, a registered investment advisor.  Financial Planning and Investment Management Services are offered through Nelson, Van Denburg & Campbell Wealth Management Group. LLC.

Close Menu

Disclaimer

No Rendering of Advice
The information contained within this website is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant.

Presentation of the information via the Internet is not intended to create, and receipt does not constitute, an accountant-client relationship. Internet subscribers, users and online readers are advised not to act upon this information without seeking the service of a professional accountant.

Any U.S. federal tax advice contained in this website is not intended to be used for the purpose of avoiding penalties under U.S. federal tax law.

Accuracy of Information
While we use reasonable efforts to furnish accurate and up-to-date information, we do not warrant that any information contained in or made available through this website is accurate, complete, reliable, current or error-free. We assume no liability or responsibility for any errors or omissions in the content of this website or such If you wish to contact the webmaster of this website, please call CPA Websites Solutions at 802-655-1519.

Disclaimer of Warranties and Limitations of Liability
This website is provided on an “as is” and “as available” basis. Use of this website is at your own risk. We and our suppliers disclaim all warranties. Neither we nor our suppliers shall be liable for any damages of any kind with the use of this website.

Links To Third Party Websites
For your convenience, this website may contain hyperlinks to websites and servers maintained by third parties. We do not control, evaluate, endorse or guarantee content found in those sites. We do not assume any responsibility or liability for the actions, products, services and content of these sites or the parties that operate them. Your use of such sites is entirely at your own risk.

Privacy Policy

Here is our Privacy Policy required by the Gramm-Leach-Bliley Act of 1999.

We collect nonpublic personal information about you from the following sources:

  • Information we receive from you on applications, tax organizers, worksheets and other documents;

  • Information about your transactions with us, our affiliates, or others;

  • Information we receive from a consumer-reporting agency.

We do not disclose any nonpublic personal information about our clients or former clients to anyone, except as permitted by law.

We restrict access to nonpublic personal information about you to those members of our firm who need to know that information to provide services to you. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your nonpublic personal information.

Online information is stored on secure servers located in CPA Website Solutions SOC 1 certified data centers.

If you have any questions about this policy, please do not hesitate to contact us.