In the closing months of 2019 Congress Passed the Secure Act and it has some relatively large impacts on retirement savings and retirement plans going forward. I have read several articles digesting the impact of the act but I think Fidelity has put together the best article that details the impacts fairly well.
Secure Act – Fidelity’s Article here
Secure Act – High Level points:
- Require Minimum Distribution Age has been changed to 72 from 70.5
- This only impacts those that have not started RMDs. Those who started RMD’s in 2019 will need to continue to do so even if they are younger than 72
- As a reminder this is the age you MUST start taking distributions from your retirement accounts that are tax deferred (Roth’s are post tax and are not subject to RMD’s as of the time of this article).
- Removed the age limit on Traditional IRA contributions (still required earned income)
- If you worked part time > 1000 hours in one year or > 500 hours over 3 years, you are now eligible for your employers 401k.
- Parents can withdraw Penalty free up to $5k from retirement accounts the year of a child’s birth or adoption
- NOTE – This will still be subject to income taxes
- Basically killed the “stretch” IRA. If someone inherits an IRA that is a non-spouse, funds must be distributed and pay tax with 10 years
- Added a tax credit for small businesses starting a retirement plan
- Allows up to 10k to be distributed from a 529 plan to pay down student debt.
If you have any questions on how this may apply to you, please do not hesitate contact me. Please note that the information from this post is meant to be educational and should not be considered advice. Clients should contact me to receive specific advice on your situation.