Ask The Expert: Legal Advice
2020 new legislation
IS YOUR retirement
more SECURE? by Jennifer Balmos, Owner of Balmos Law, PLLC
T
he SECURE Act, effective on January 1, 2020, brings three major changes to retirement planning.
First, the age at which an individual must take required minimum distributions of his or her retirement account has been raised from 70½ to 72. This is great news for anyone who doesn’t need the income to cover their living expenses, as it gives the assets more time to grow. Second, the SECURE Act removes the age restriction for qualified retirement accounts, meaning that individuals may continue to contribute to these accounts even after reaching age 70 ½.
Now for the not so great news. For many beneficiaries, the SECURE Act eliminates the “stretch” for inherited retirement funds. Prior to its enactment, those who inherited retirement funds could “stretch” the payments out over their life expectancies. For younger beneficiaries, this had the benefit of smaller annual distributions made over a longer period of time, which minimized the impact of income tax on the distributions. The SECURE Act, however, requires that all retirement funds be paid out within 10 years, unless the beneficiary fits one of a few exceptions. Practically speaking, an individual who inherits a retirement fund during her peak earning years could
find herself unexpectedly bumped into
a higher tax bracket. The Congressional Research Service estimates that this
change could generate up to $15 billion in tax revenue over the next 10 years.
That said, there are some exceptions to
this rule. For example, minor children may continue to “stretch” out distributions
over their life expectancy. However, that
changes when the child reaches the age of majority. Once the child turns 18, he
or she will now be subject to the 10-year payout rule.
In light of these changes, both
retirement plans and estate plans should be carefully reviewed.
940.300.9834 | Balmoslaw.com | 2652 FM 407, STE. 215G • Bartonville, TX 76226
26 | LANTANA LIVING
| February 2020
www.LantanaLiving.com
