How the SECURE Act Impacts Your Retirement, Ep #102

Financial Symmetry: Balancing Today with Retirement

The SECURE Act is the biggest piece of retirement legislation to pass since 2006.

On this episode, we discuss what the SECURE Act is and how it will affect you and your retirement plans. The acronym SECURE stands for "Setting Every Community Up for Retirement Enhancement."

Watch corresponding Youtube video here: https://www.youtube.com/watch?v=d0K8KBlCYhs&t=2s

In our breakdown of the new bill, you’ll learn about the highlights including new IRA rules, changes to 401K’s, non-retirement changes, and extenders.

The Stretch IRA is not as stretchy

One of the most impactful changes in the legislation deals with the Stretch IRA provision for non-spouse beneficiaries. Under the old law, upon a person’s death, the non-spouse beneficiaries of their 401K’s and IRA’s could withdraw savings over the span of their entire lifetime.

Now, as of January 1, 2020, the Secure Act compresses that time period to only 10 years after the year of death, thus speeding up the timeframe for taxes to be paid on these pre-tax savings. This complicates some old strategies being used, but creates new planning techniques for others.

There are a few eligible designated beneficiaries that will avoid the 10 year payout. These include:

• the surviving spouse of the deceased account owner
• a minor child of the deceased account owner
• a beneficiary who is no more than 10 years younger than the deceased account owner
• a chronically-ill individual
• a disabled individual

Tune in to see how you may need to tweak your retirement withdrawal strategies to best work for you and your heirs.

More changes to IRA’s

The Stretch IRA wasn’t the only thing that changed with IRA’s. The required minimum distribution (RMD) age was raised from age 70 ½ to 72. This means, for those yet to reach 70.5 by 1/1/2020, that you won’t have to take funds out of your IRA until age 72. You’ll have a year and a half longer to convert those funds to a Roth IRA, depending on tax brackets.

Despite the RMD age moving back, you still have the option to make a qualified charitable distribution (QCD) at age 70. If you'd like a refresher for some of these financial acronyms we're mentioning, check out episode 63, our Financial Acronymology guide.

Additionally, those over 70 and still working can now contribute to a traditional IRA if they have earned income. In the old law, this ability stopped at 70.5. But people are living and working longer now (without adequate retirement savings for many), so the SECURE act makes this possible.

Good news for 401K’s

Finally, we get to the part about setting communities up for retirement. With the changes in the Secure Act, more small business owners will be able to offer 401K’s to their employees.

The bill makes it easier to be auto-enrolled to help those people that never get around to setting up their 401K contributions. Part-time employees will also benefit from the new bill. Now part-timers who have worked 500 hours over the past 3 years will have access to 401K’s. These changes are designed to make retirement savings a bit easier.

How will the Secure Act change your financial plans?

The Secure Act is a great reminder of how quickly laws can change. Without close attention, your original intent could no longer be the most optimal strategy for your retirement plans.

One of our primary responsibilities is to help you uncover tax saving or planning opportunities when they become available. Remember, financial planning is like putting together a puzzle. Make sure you have all the pieces by learning as much as you can to improve your financial opportunities.

Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for 20 years.

Outline of This Episode

• [3:04] The biggest changes with the Secure Act are to IRA’s
• [11:44] Small businesses will find it easier to offer 401K’s to their employees
• [17:07] Non-retirement changes
• [18:55] The extenders

Resources & People Mentioned

• Fidelity – The SECURE Act and You
• Fidelity – SECURE Act FAQ’s
• Lexicology – The Good News and Really Bad News for IRA Owners Under the SECURE Act
• Kitces.com – SECURE Act and Tax Extenders
• Episode 63 – Financial Acronymology

Connect With Chad and Mike

• https://www.financialsymmetry.com/podcast-archive/
• Connect on Twitter @csmithraleigh@TeamFSINC
• Follow Financial Symmetry on Facebook

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