Are you feeling insecure about the SECURE Act?
Well, knowledge is power. Here’s what you need to know.
The SECURE Act is the retirement bill signed into law in December that changes a number of rules related to tax-advantaged retirement accounts. In case you’re wondering what SECURE stands for, the full name of the act is: Setting Every Community Up for Retirement Enhancement Act of 2019. Quite a mouthful.
As with all new bills, there are positive and negative impacts on taxpayers. The good news is it will increase access to tax-advantaged retirement accounts by making it easier for small business owners to set up 401(k) plans, and it will expand eligibility to some part-time workers.
The not-so-good news is if you are the non-spouse beneficiary of an IRA, you will no longer be able to stretch disbursements out over your lifetime. The new rules require that you fully cash out the inherited IRA within 10 years of the death of the original account holder. This applies only to those accounts where the original account holder dies in 2020 or later.
Here are some other provisions that may impact you.
- Repeals the “kiddie tax” and reverts the tax on children’s unearned income back to their parents’ tax rate for tax years beginning in 2020. You can use the new rates for your 2019 taxes, and you have the option of amending your 2018 tax return as well.
- Allows you to use a 529 account for qualified student loan repayments up to certain limits.
- Enables retirement plan participation of part-time employees who work either 1,000 hours in the year or have three consecutive years with 500 hours of service.
- Changes the age when you need to start taking RMDs (required minimum distributions) from your retirement accounts from 70½ to 72.
