President Donald Trump signed the Setting Every Community Up for Retirement Enhancement (SECURE) Act in December 2019 and it became law on January 1, 2020. This legislation made a variety of changes to long-term retirement savings. These can affect Americans at any age. Continue reading below to learn more and contact an experienced New York estate planning attorney for help with your estate.
Required Minimum Distribution Age
The required minimum distribution age increased from 70 ½ to 72. Individuals used to be required to start withdrawing from their traditional IRA by April 1 the year after they turned 70 ½. By moving the age to 72, IRA owners can defer paying tax on the funds so they can continue to grow.
Age Limit for IRA Contributions
The age limit for IRA contributions was removed. In the past, those with individual retirement accounts only used to be able to contribute to the account until they reach 70 ½ years old. By removing the age limit, people are able to contribute to their IRA as long as they still work.
Inherited Retirement Account Distributions Taken Within 10 Years
Inherited retirement account distributions are not required to be taken within 10 years. Those who inherited IRAs used to be able stretch out withdrawals and tax payments on distributions over the course of their life. Under the SECURE Act, beneficiaries of retirement account owners who die after January 1, 2020 may be required to withdraw assets within 10 years. Exceptions to this can include a surviving spouse, minor children, disabled and chronically ill beneficiaries, and beneficiaries who are up to 10 years younger than the IRA owner.
New Parents Can Take Penalty-Free Withdrawals
New parents are able to take penalty-free withdrawals under the SECURE Act. The IRS allows penalty-free early distributions from some types of retirement accounts under specific circumstances. The SECURE Act added a new exception, allowing a $5,000 withdrawal after an individual experiences the birth or adoption of a child.
Long-Term Part-Time Employees Eligible for 401(k) Plans
Long-term part-time employees are now eligible for 401(k) plans. In the past, part-time employees had to work a minimum of 1000 hours during a 12-month period to contribute to a 401(k). Under the SECURE Act, there is a way for more part-time workers to become eligible. Employees who are 21 years old or older and accrue a minimum of 500 hours in a 12-month period for three consecutive years can contribute to a 401(k) plan.
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The Lauterbach Law Firm is proud to serve clients throughout Rockland County who are faced with legal matters related to estate planning, real estate, foreclosure defense, landlord-tenant law, business law, and criminal defense. If you require the services of an experienced team of attorneys, contact The Lauterbach Law Firm today to schedule a consultation.