FEBRUARY 2020
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THE SECURE ACT IS NOW LAW HERE’S WHAT YOU NEED TO KNOW
In the final weeks of 2019, the SECURE Act passed through Congress. It was signed into law by President Trump Dec. 20 and became effective Jan. 1. Here’s a quick summary of the changes the SECURE Act brings. First, insurance companies — not employers — now have fiduciary responsibility over the investment options offered through annuities within 401(k) plans. Prior to the SECURE Act, employers were responsible for ensuring suitable investments in annuities. Second, the age at which IRA and 401(k) account owners must take a required minimum distribution (RMD) has been increased from 70 1/2 to 72. If you turned 70 1/2 in 2019, then you’ll still need to take an RMD by April 1, 2020, followed by one no later than Dec. 31, 2020, and by Dec.
This presents a challenge to any IRA that names a trust as a beneficiary because the new 10-year payout rule will still apply. However, certain beneficiaries may still “stretch” the payout of their inherited IRA:
• Spouses
• Minor children, but not grandchildren
• Disabled and chronically ill individuals
• Those who are not more than 10 years younger than the IRA owner
Fifth, part-time workers may now enter into company- sponsored retirement plans. Previously, employers could exclude employees who worked less than 1,000 hours
31 of each subsequent year. However, if you turn 70 1/2 this year, then you don’t need to take your first RMD until April 1 of the year after you turn 72. Third, the age limit for making contributions to traditional IRAs has been eliminated. Previously, no one over the age of 70 1/2 was able to save money in this type of account. Fourth, the so-called “stretch IRA” is no longer. Most beneficiaries of IRAs must now withdraw 100% of those assets within 10 years of inheriting the account.
per year. Now, workers are eligible to participate if they worked 1,000 hours within one year or 500 hours within three consecutive years.
And finally, small businesses can now access multiple employer plans regardless of industry. This is expected to help smaller companies and their employees enjoy features that only large companies previously had in their retirement plans.
–Wes White
These articles are designed to provide general information on the subjects covered. They are not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Patriot Wealth and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney. Investment Advisory Services is offered through Retirement Wealth Advisors (RWA), a Registered Investment Advisor. Patriot Wealth and RWA are not affiliated. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
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