How the SECURE Act Will Impact You and Your Retirement - Guest Blog

How the SECURE Act Will Impact You and Your Retirement - Guest Blog

by Richard Taylor on Jan 10, 2020

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This guest blog has been written by James Cassidy, CPA, International Tax Consultant at Shulman Lobel (who is also the author of: Reporting Your UK Pension / QROPS and Non-U.S. Assets).

As an early holiday gift, on December 19, the Senate passed the “Setting Every Community Up for Retirement Enhancement” Act (“SECURE Act” or “Act”), which was signed into law by the President on December 20. The SECURE Act expands opportunities for individuals to increase their savings and makes administrative simplifications to the retirement system. 

Some of the changes in law to be aware of:

US Pension Changes

The Act removes the age limit at which an individual can contribute to a traditional IRA. For 2019 and earlier, an individual could not contribute to an IRA after age 70½; the Act will allow anyone that is working and has earned income to contribute to a traditional IRA regardless of age starting with the 2020 tax year.

Effective January 1, 2020, under the SECURE Act, the required beginning date for an IRA withdrawal is the April 1 following the calendar year in which the IRA owner attains age 72. Under the old law the required beginning date was based on age 70 ½.

Starting in 2020, upon the birth or adoption of a child, the Act permits an individual to take a "qualified birth or adoption distribution" of up to $5,000 ($10,000 for a married couple) from an applicable eligible defined contribution plan or IRA. This distribution is not subject to the 10% early withdrawal penalty, but income tax will still be due.

With few exceptions, if one inherits an IRA after December 31, 2019, you will be required to withdraw the assets within ten years. If you inherited IRA from an original IRA owner who passed away prior to January 1, 2020, no changes to your current distribution schedule are required. Exceptions to the new 10-year distribution requirement include assets left to a surviving spouse, a minor child, a disabled or chronically ill individual, and beneficiaries who are less than 10 years younger than the decedent.

There is increased access to employer-sponsored retirement plans for certain part-time employees.

The Act also allows for expanded provisions for 401(k) post retirement plans including increased incentives for employer implementation, increased participation for certain part-time employees, and increased plan options for single and multi-employer plans.

Sec. 529 Education Savings Plans

Individuals now can pay up to $10,000 (lifetime benefit) of student loans with 529 plan assets.

We expect the Internal Revenue Service to clarify many of the new provisions in the coming months.

Should you require additional information please feel free to contact me at (212) 868-5781 and at jcassidy@schulmanlobel.com.

 

Taylor & Taylor Financial Services USA LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.