Our two previous blogs have discussed the elimination of the stretch provisions for retirement accounts (see https://grissomlawfirm.com/secure-act-stretch-ira)and the use of accumulation trusts (see https://grissomlawfirm.com/secure-act-accumulation trust) in light of the new SECURE Act. While the SECURE Act has necessitated some changes in Estate Planning, it also has provided some benefits.
Prior to the SECURE Act, withdrawals from IRAs had to start by 70 ½, but now those required minimum distributions don’t have to start until 72. The benefit of the age extension is that it allows IRAs and 401(k)s to continue to grow without being impacted by distributions and taxes. The new age also allows you more time to turn your IRA into a ROTH IRA if such a conversion would be beneficial to you or your heirs.
This Forbes article provides an example of how the increase in age can have big financial benefits: https://www.forbes.com/sites/leonlabrecque/2019/12/21/the-secure-act-and-your-401k–ira-5-things-you-need-to-know-right-now/#3ba80e212ebb
The age restriction on retirement account contributions has also been eliminated. So long as you are working, you can continue to contribute to your retirement account. With people living longer and working longer, this allows more time to build up wealth and begin a true and rich retirement when you are ready!
In addition, the SECURE Act allows:
- Owners to withdraw up to $5,000 from an IRA to help offset the costs of the birth or adoption of a child without incurring any penalties;
- Long time part-time employees could become eligible for employer qualified retirement plans; and
- Owners to withdraw up to $10,000 from §529 plans to repay student loans. The new provision is intended to help students pay off student loans faster, thereby decreasing the total amount owed as interest doesn’t have time to accrue.
Future blog articles will discuss some other impacts of the SECURE Act, specifically focusing on the effect of the law on small business and the change to the “kiddie tax” or generation skipping tax, which could be beneficial for those who wish to leave money directly to grandchildren.
Disclaimer
This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC.