th<\/sup>, the SECURE Act became law. It makes the biggest changes in\nAmerican retirement in over a decade. While most of the changes were good,\nthere are some provisions which could cause major issues for some\nretirees. We discussed how this bill\npassed in the House of Representatives earlier this year with over 400 votes\nfor and only three against.<\/p>\n\n\n\n Congress\nrealized that many Americans were not prepared for retirement. The SECURE Act\nmakes it easier for small companies to work together to form retirement plans.\nThis helps to reduce cost to small companies. It also allows part-time\nemployees to participate in 401(k) plans. It also allows employees to keep\ncontributing to IRAs after age 70 \u00bd if they continue to have earned income.<\/p>\n\n\n\n
Another\nimportant change is people will automatically be enrolled in retirement plans\nunless they opt out. This is important because fewer people receive pensions\ntoday than earlier generations. When you need to opt out instead of opt-in,\nmore people participate and save for their future.<\/p>\n\n\n\n
The\nstarting age for Required Minimum Distributions is increased to age 72. This\nclears up some confusion getting rid of the half year requirement. Now everyone\nwill start the year they reach 72. People who were 70 \u00bd before the end of 2019\nwill continue using the 70 \u00bd requirement. Allowing people to wait an extra year\nand a half will be beneficial to most people. <\/p>\n\n\n\n
Often some\npension income goes away at the death of the first spouse. We know one Social\nSecurity check will vanish. By allowing people to wait a little longer before\nstarting RMDs your qualified money can grow more and be deferred from taxes.\nRemember, you can always take more out if necessary for living expenses; this\nis only required minimum distributions.<\/p>\n\n\n\n
The law\nmakes no changes to Qualified Charitable Distributions (QCD).This is a\nprovision of Trump’s tax code related to charitable donations for people who\nhave RMDs. This means that people over 70 \u00bd can give their RMDs up to $100,000\ndirectly to a qualified charity. You do not get a deduction on your tax return,\nbut you do not have to recognize the income. This can be a very smart way to\nmake contributions. <\/p>\n\n\n\n
While much\nof the SECURE Act is good policy, there are several parts that could become\nvery expensive to some families. In the early 1990s, the stretch IRA became a\npopular estate planning option for people with large 401(k) and IRA balances.\nIf structured properly, the balance could be stretched to younger family members.\nThis meant that even though they had to start taking distribution over their\nlife expectancy they could pay the taxes a little at a time. This allowed them\nto stay in lower tax brackets.<\/p>\n\n\n\n
The SECURE\nAct eliminates much of this strategy. Eligible Designated Beneficiaries are the\nonly groups that are exempt from the new rules. This group is composed of\nSpousal Beneficiaries, Disabled Beneficiaries, Chronically ill, Individuals who\nare not more than 10 years younger than the decedent and certain minor children.\nThese rules apply to deaths that occur on January 1, 2020. <\/p>\n\n\n\n
People not\nin the exempt group will have to take all of the inherited assets within ten\nyears. They can take any amount out each year, but the total balance will\nbecome taxable no later than the 10th<\/sup> year. This will cause many\nadult children to recognize this inherited income during their own highest\nearning years. This will make taxes at higher rates payable to the government.\nIn fact this is expected to generate billions of tax dollars over the next ten\nyears. <\/p>\n\n\n\n These rules\nalso apply to inherit Roth IRAs which must be distributed within ten years.\nThis income will remain tax free. If a trust was named the beneficiary, they\nmay have to be written to comply with the new law. There are a few other\nchanges which we will deal with in a future column. Just be sure you realize\nthe SECURE Act can be very expensive in certain situations and you need to be\nvery proactive in your tax planning. <\/p>\n\n\n\n
Call the office to\nschedule a no cost, no obligation strategy session. <\/strong><\/p>\n\n\n\n724-684-6600<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"Your Financial Future On December 20th, the SECURE Act became law. It makes the biggest changes in American retirement in over a decade. While most of the changes were good, there are some provisions which could cause major issues for some retirees. We discussed how this bill passed in the House of Representatives earlier […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"acf":[],"yoast_head":"\n
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