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The SECURE Act: Major Tax Changes Become Effective in 2020 STORY BY JIM KERR, CFA, CFP® WITH AUSTIN ASSET
As a Financial Advisor at Austin Asset, I am routinely keeping up with changes to tax laws and how that impacts our financial planning assumptions. One of the largest reforms just occurred and here is what you need to know: The Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed by the House in Summer 2019, then passed by the Senate and signed into law by President Trump in December 2019. It provides multiple tax changes for individuals and small employers, with several changes applying to retirement accounts. Some of the changes include: • You can now contribute to your traditional IRA or Roth IRA no matter how old you are, if you have earned income. • Your Required Minimum Distributions (RMD) can now be delayed until April 1st following the year you turn age 72 (instead of age 70½). This new rule only applies to people who had not turned age 70½ by end of 2019. • If you inherit an IRA from someone other than your spouse, you will no longer be allowed to stretch the distributions over your life expectancy. All distributions from an In-
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herited IRA must occur within 10 years. Note: This 10-year rule does not apply to beneficiaries who are spouses, disabled, chronically ill, minor children, or not more than 10 years younger than the decedent. Also, the 10-year rule only applies if the decedent passed away after the year 2019. • You can now take a penalty-free withdrawal of up to $5,000 from your IRAs and other qualified plans due to the birth or adoption of a child. • There are new and increased tax credits employers can take to encourage them to set up and maintain retirement plans for their employees. • Part-time employees who work at least 500 hours in three consecutive years are eligible to participate in their employer’s 401(k). • The employer can set up employerfunded retirement plans after year-end up to the date of the employer’s tax return.
