The SECURE Act: What You Should Know Now
President Donald Trump has signed into law the Setting Every Community Up for Retirement Enhancement or SECURE Act. The Act ushers in major changes to the way most Americans plan and save for retirement.
The biggest retirement legislation in more than a decade, the SECURE Act expands access to annuities in retirement plans, increases the age for required minimum distributions and eliminates the age cap to contribute to a traditional individual retirement account.
Here are a few key provisions you should be familiar with:
- Raising the required minimum withdrawal age from 70 ½ to 72 (applying to anyone who has not turned 70 ½ by the end of 2019)
- Eliminating the age limit restriction (previously capped at 70 ½) for traditional IRA contributions
- Allowing Americans who just had a baby or adopted a child to take withdrawals of up to $5,000 from their retirement accounts, including a 401(k) or IRA, without incurring the 10-percent tax penalty
- Permitting businesses to participate in multi-employer 401(k) plans (MEPs)
- Creating safe-harbor language easing the path for employers to offer annuities as part of their 401(k) plans
- Allowing up to $10,000 of a 529 savings plan to be used to pay off student debt over the lifetime of the plan, an additional $10k can be used for each plan beneficiary
- Finally, the most impactful change is the end of the “Stretch IRA” which will now require the beneficiary of an IRA to draw down the account — and pay taxes on their withdrawals — over 10 years instead of over their lifetime.
With the proposed changes, be prepared to take another look at your retirement planning as well as gain an expert understanding of the changes and long-term tax implications to confidently advise your clients needing to update their own retirement and estate plans.