The SECURE Act for The Rest of Us
For those of us who don’t have to worry about required minimum distributions for a few decades, there are some new things in the SECURE Act for the rest of us. Those include:
- better access to retirement plans,
- new provisions for penalty-free withdrawals from your Retirement Accounts
- and a tweak to 529 plans
We’ll go into some of those things on this week’s episode of Monday Morning Money.
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Listen Now: The SECURE Act for the Rest of Us
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Webinar: Death of The Stretch IRA
The Stretch IRA provisions for non-spouse IRA beneficiaries has been eliminated by the SECURE Act. We have created a short webinar (7 minutes) that explains the changes in more detail. Click on the button to watch
Improved access to retirement plans
The main purpose of the SECURE Act is to improve access to retirement plans for more people. It is an acronym for Setting Every Community Up for Retirement Enhancement.
The primary focus is to make it easier and cost-effective for companies to set up a plan. So a lot of those provisions don’t really apply to most of us.
One item which could affect you though is expanded eligibility for part time workers. The new law makes it easier for long-term, part-time employees to be eligible for a retirement plan. Under the new rules, if you work at least 500 hours in 3 consecutive years, you will now be eligible to participate in your employer’s plan. This is far less restrictive than in past years.
More penalty free access to funds
You can now take penalty-free withdrawals from an IRA or retirement plan for birthing or adoption costs. If you are having a baby or adopting a child, you will be able to withdraw up to $5,000 to help cover those expenses. For a couple, this means they can withdraw up to $10,000 total–$5,000 each. You will still have to pay income taxes, but you will not face the 10% early withdrawal penalty.
A new tax advantaged way to pay student loans.
Another provision of the new law allows you to withdraw $10,000 from a 529 college savings plan to pay on student loans. Before this act, student loans were not considered a qualified education expense. That meant you had to pay taxes and penalties if you withdrew money from a 529 plan to pay towards those debts. Now you can access that money for that purpose.
Lifetime income provisions.
Administratively speaking, plan sponsors now have to make annual “lifetime income disclosure statements.” This tells you how much income you could get each month if you bought an immediate annuity. Those will simply be estimates.
There are also some provisions for plan sponsors to make it easier to offer annuities within a plan. This may or may not be a good thing. Annuities are one of the most abused financial products out there, therefore you should be very careful about using one.
Consult a trusted Advisor
Any time we see major changes like this, it is a good idea to review your plans. Talk to a trusted advisor to see if any of these new provisions will impact you.
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About the Author
Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors He typically works with people who are planning for retirement. Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio. Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.