Setting Every Community Up for Retirement Enhancement SECURE Act
Are you familiar with the SECURE Act passed by congress recently? As we start a brand-new decade, many are unaware of this significant bill that was recently passed and is designed to help Americans better prepare for retirement. The Setting Every Community Up for Retirement Enhancement – SECURE Act has many different implications for both the individual retirement investor as well as employers who offer retirement plans. Many investors are unable to keep up with every retirement law as they can be complex to understand and can change frequently. Unfortunately, this means there can be missed opportunities to take advantage of or the potential for negative consequences if the law is not followed. Therefore, it is important to consider finding a financial advisor who keeps up with changes in the industry and relays important information on to their clients. I am going to highlight three areas of the SECURE Act that are important for individual retirement investors to understand.
The first is the changing required minimum distribution age (RMD) from age 70 ½ to 72. This means investors who are no longer working have an extra year and a half before they must begin paying taxes on their qualified accounts. Retirees may still take withdrawals without penalty any time after age 59½. However, as more people work beyond the “traditional” retirement age, and as we continue to live longer, Uncle Sam is giving us an extra 18 months before we must start taking money (and pay the necessary taxes) from our retirement accounts. Individuals who have already begun taking their RMDs prior to 2020 must continue to do so.
The SECURE Act also repeals age restrictions for contributing to IRAs. Individual investors who have earned income will now be able to continue contributing to IRAs beyond the age of 70 ½. It is no surprise that Americans are working longer so it makes sense to allow investors to contribute for longer.
Non- Spouse Inherited IRAs are significantly affect by the SECURE Act because the entire balance of the inherited IRA must now be withdrawn within ten years. Previously, beneficiaries were able to withdraw the account over the course of their own lifetime, otherwise known as a stretch IRA. Tax implications could be quite significant for an inherited IRA since they must be dispersed over a shorter time frame. Exempted beneficiaries to this change include surviving spouses, minor children up until the age of majority, individuals within 10 years of age of the deceased, the chronically ill and the disabled.
These are just three of the changes to individual retirement accounts that are a result of the SECURE Act as there are quite a few other changes not highlighted here. I recommend you consider meeting with a financial advisor who is also a fiduciary to review your accounts and determine if you should make any changes to your current investment plan. A fiduciary is legally obligated to give you advice that is in your best interest. Not all financial advisors take a fiduciary approach so don’t be afraid to ask them if their agreement specifically states that they will be acting as a fiduciary in their relationship with you. As always, the team at Victory Consulting would be honored to sit down with you and help you review your current investment strategy. Best wishes for a prosperous 2020.
Ashley Rosser, President
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.