Secure Act 101
After I wrote about the Setting Every Community Up for Retirement Enhancement (SECURE) Act, I received a slew of questions from readers. So to help clear up some of the confusion, we’re bringing on IRA guru Ed Slott. (Ed will also join us for a tax season related episode)The Secure Act includes significant changes to retirement accounts, including:Age Limit Eliminated for Traditional IRA ContributionsBeginning in 2020, the new law eliminates the age limit for traditional IRA contributions (formerly 70 ½). Now, those who are still working can continue to contribute to a traditional IRA, regardless of their age.RMD Age Raised to 72The SECURE Act also raises the age for beginning RMDs to 72 for all retirement accounts subject to RMDs. IRA owners reaching age 70 ½ in 2020 catch a break and will not have to take their first RMD in 2020 now that the RMD deadline has been extended to age 72.New Exception to the 10% Penalty for Birth or AdoptionThe SECURE Act adds a new 10% penalty exception for birth or adoption, but the distribution is still subject to tax. It is limited to $5,000 over a lifetime. The birth or adoption distribution amount can be repaid at any future time (re-contributed back to any retirement account).IRA Contributions with Fellowship and Stipend PaymentsAdditionally, the new law allows taxable non-tuition fellowship and stipend payments to be treated as compensation to qualify for an IRA (or Roth IRA) contribution.Employer Liability Protection for Annuities in PlansThe SECURE Act provides a safe harbor for employer liability protection for offering annuities in an employer plan. This is expected to open the door for more annuity products to be available as investment choices in employer plans.Good Bye, Stretch IRABeginning for deaths after December 31, 2019, the stretch IRA is replaced with a ten year rule for the vast majority of beneficiaries. The rule requires accounts to be emptied by the end of the tenth year following the year of death. There are no annual RMDs. Instead, the only RMD on an inherited IRA is the balance at the end of the 10 years after death. For deaths in 2019 or prior years, the old rules would remain in place.There are five classes of “eligible designated beneficiaries” who are exempt from the 10-year post-death payout rule and can still stretch RMDs over life expectancy. These include surviving spouses, minor children, disabled individuals, the chronically ill, and beneficiaries not more than ten years younger than the IRA owner.Have a money question? Email me here.Please leave us a rating or review in Apple Podcasts."Jill on Money" theme music is by Joel Goodman, www.joelgoodman.com.
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About The Show
Host Jill Schlesinger, CFP®, tackles sometimes uncomfortable and even controversial money and investing issues, without the financial jargon, to get to the heart of what’s important for anyone to know. Jill takes listener phone calls and interviews informative and entertaining guests each week to uncover surprising insights and provide actionable information so you can make the most of your money. Have a question? Email us at askjill at jillonmoney dot com.