February 7, 2020

The SECURE Act and Impacts to Your Retirement

by Jake Martin, The Joseph Group

Big changes just took effect for retirement accounts. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law on Dec. 20, 2019, contains many changes to retirement accounts. Here are the key changes to be aware of:

  1. Broadens the availability of Multiple Employer Plans (MEPs) where several companies join together in the same retirement plan (e.g., 401(k) plan).
  2. Creates a simplified option for employers to provide a lifetime income option on 401(k) plan accounts.
  3. Requires employers to allow employees who work 500 hours or more per year to participate in the employer retirement plan. This takes effect in 2021.
  4. Allows penalty-free IRA withdrawals prior to age 59.5 for up to $5,000 related to birth or adoption expenses. However, the distribution is still taxable.
  5. Required minimum distributions (RMDs) move from age 70.5 to age 72. RMDs are mandatory distributions from IRAs and retirement plans that are taxable. The first distribution can still be delayed until April following the year that the person turns 72. Qualified charitable distributions are still allowed starting at age 70.5.
  6. Non-spouse inherited IRAs must be fully distributed within 10 years. Accounts inherited prior to Jan. 1 are grandfathered into the previous lifetime distribution rule.
  7. Anyone with earned income can contribute to a traditional IRA and/or a spousal IRA after the age of 70.5 (previously contributions were capped at age 70.5).
  8. 529 accounts can now be used to repay up to $10,000 of student loan debt for themselves, a child or a sibling of child.

Depending on your personal circumstances, the SECURE Act may impact you in multiple ways. Check with your financial advisor and tax preparer to see how the SECURE Act affects you.