SECURE ACT
SETTING EVERY COMMUNITY UP FOR RETIREMENT
ENHANCEMENT (SECURE ACT)
Part of Congress spending bill, they passed SECURE Act effective
January 01, 2020. Key takeaways:
IRA Contributions:
The new law repeals age (70 1/2) restriction for contributions to traditional IRA. Eligible individuals (for 2019 & 2020) can contribute up to $6,000, plus a $1,000 catch-up contribution if they turn age 50 and older in the year of contribution.
Part-time workers:
Part-time workers (i.e. those working less than 1,000 hours) can participate in 401(k) plans. Eligibility is one year of service (with 1,000- hour rule) or three consecutive years of at least 500 hours of service.
Required minimum distributions (RMD):
The new law pushes back the RMD age to 72 (previously 70 1/2) to reflect longer life expectancy.
Early Withdrawals:
The SECURE Act adds to the list, (besides from other exemptions already that exists for early withdrawal 10% tax penalty), penalty free distributions for the qualified birth and adoption expenses. Within a year of birth or adoption, parents can take up to $5,000 from 401(k) or IRA or other qualified plan.
Stretch IRA:
The "Stretch IRA" provision has been eliminated for non-spousal IRAs. The IRAs inherited from original owners who passed away on or after January 01, 2020, the new law requires many beneficiaries to withdraw from all assets from an inherited IRA or 401(k) plan within 10 years following the death of the account holder.
Section 529 plan to pay Student loans:
Section 529 owners may now withdraw up to $10,000 tax-free for payments toward qualified education loans. The $10,000 limit is a lifetime limit that applies to 529 plan beneficiary and each of their siblings.
Section 529 plan to pay for Apprenticeship programs:
Section 529 allows students who are pursuing apprenticeship may use tax-free 529 plan distributions to pay for fees, textbooks, supplies and equipment required for registered apprenticeship.
ENHANCEMENT (SECURE ACT)
Part of Congress spending bill, they passed SECURE Act effective
January 01, 2020. Key takeaways:
IRA Contributions:
The new law repeals age (70 1/2) restriction for contributions to traditional IRA. Eligible individuals (for 2019 & 2020) can contribute up to $6,000, plus a $1,000 catch-up contribution if they turn age 50 and older in the year of contribution.
Part-time workers:
Part-time workers (i.e. those working less than 1,000 hours) can participate in 401(k) plans. Eligibility is one year of service (with 1,000- hour rule) or three consecutive years of at least 500 hours of service.
Required minimum distributions (RMD):
The new law pushes back the RMD age to 72 (previously 70 1/2) to reflect longer life expectancy.
Early Withdrawals:
The SECURE Act adds to the list, (besides from other exemptions already that exists for early withdrawal 10% tax penalty), penalty free distributions for the qualified birth and adoption expenses. Within a year of birth or adoption, parents can take up to $5,000 from 401(k) or IRA or other qualified plan.
Stretch IRA:
The "Stretch IRA" provision has been eliminated for non-spousal IRAs. The IRAs inherited from original owners who passed away on or after January 01, 2020, the new law requires many beneficiaries to withdraw from all assets from an inherited IRA or 401(k) plan within 10 years following the death of the account holder.
Section 529 plan to pay Student loans:
Section 529 owners may now withdraw up to $10,000 tax-free for payments toward qualified education loans. The $10,000 limit is a lifetime limit that applies to 529 plan beneficiary and each of their siblings.
Section 529 plan to pay for Apprenticeship programs:
Section 529 allows students who are pursuing apprenticeship may use tax-free 529 plan distributions to pay for fees, textbooks, supplies and equipment required for registered apprenticeship.
