The SECURE Act: Individuals

By January 30, 2020 September 22nd, 2022 No Comments

The Setting Every Community Up for Retirement Enhancement Act (“SECURE Act”), passed in December 2019, has made changes that will, as you might guess, impact those approaching or navigating their retirement years. Many of the changes may also impact small business owners & retirement plan fiduciaries, the details of which can be found here.

While not an exhaustive list, the provisions below create opportunities for families to revisit their tax strategy, estate plan, and retirement projections. Keep in mind, the IRS will need to provide additional guidance on execution of many of the provisions, which we will be on the lookout for in the coming months.

KEY PROVISIONS

  • “Stretch” IRA Elimination: Non-spouse beneficiaries of inherited retirement accounts must be paid out within 10 years of the original owner’s death (exceptions apply), beginning with accounts inherited in 2020.  No annual minimum distribution is required.
  • IRA Distribution Required Beginning Date (RBD) Raised: For those born after June 30, 1949, the required age to begin minimum distributions from retirement accounts was raised from 70 ½ to 72.
  • Qualified Charitable Distributions (QCD) No Longer Tied to RBD:  QCDs, which are gifts to charity made directly from an individual retirement account (and therefore excluded from adjusted gross income), may still be completed beginning at age 70½.  The annual QCD ($) maximum still applies.
  • IRA Contribution Cap Removed: Age limit on IRA contributions (age 70½) has been removed. Contributions may be made as long as there is earned income to contribute. Contributions made after 70½ impact QCDs.
  • 529 Plans “Qualified Higher Education Expenses” Definition Expanded: Up to $10k may be distributed from a 529 plan to make student loan payments. In addition, some costs associated with DOL-registered apprenticeship programs now qualify.
  • Qualifying Birth or Adoption Exclusion Added: Up to $5k per parent may be distributed from a retirement account penalty-free for each qualified birth or adoption. Repayment of these distributions is permitted, but timing of repayment is still to be determined.
Verum Partners does not provide tax or legal advice. Consult your tax adviser or attorney before implementing any strategy.
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