SECURE Act Makes Major Changes in IRA Rules
February 18, 2020
If you are a small business owner, a part-time worker, approaching or over age 70-1/2, a beneficiary of someone's IRA account, or the owner of a 401(k) plan, you MUST read about the changes made by the SECURE Act of 2019.
The following changes were made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 (we'll use "the Act" from here on):
- For the small business owner, the Act makes it easier to set up “safe harbor” retirement plans that are less expensive and easier to administer.
- If you are a part-time worker, you are more likely to be able to participate in an employer retirement plan.
- Approaching age 70-1/2? A major change to the Required Minimum Distribution (RMD) and IRA contribution rules.
- Most non-spouse beneficiaries of IRA accounts will no longer be able to stretch the distribution of the account over their lifetimes and instead must completely disburse the account in 10 years.
- If you currently own a 401(k) plan, the Act allows those plans to offer annuities.
There are a lot of other changes incorporated in this Act, such as the ability to use 529-plan money to repay student loans and 401(k) withdrawals for having or adopting a child. There are also little-known but impactful surprises in the Act, such as a provision to allow IRA contributions past the previous age limit of 70-1/2 (if you have earned income), but those contributions affect the tax-free status of a qualified charitable distribution.
Read this article for a more comprehensive discussion of this important topic.