Now is a good time to consider how your retirement strategy connects with estate and tax planning.
On January 1, 2020, when the SECURE Act (“Setting Every Community Up for Retirement Enhancement Act”) went into effect, it vastly impacted how Americans save for retirement and access those funds.
This legislation included numerous changes; from Required Minimum Distributions (RMDs) starting at 72 rather than 70½ to the removal of age limits on IRA contributions (Americans can now continue to contribute to their IRAs at any age while they are working). Now new parents can withdrawal $5,000 from an IRA or 401(k) after the birth or adoption of a child. Even some part-time employees are eligible to participate in 401(k) plans. The list of changes goes on and on.
However, a significant change in the estate planning world was the abolishment of stretch IRAs for most beneficiaries. The SECURE Act requires the entire balance of the participant’s account be distributed within ten years. There is an exception for surviving spouses, minor children, disabled and chronically ill beneficiaries, or a person not more than ten years younger than the IRA account owner. These individuals retain the ability to defer taxation over a longer period. However, many individuals are unable to defer taxation over a longer period.
Now is a good time to consider how your retirement strategy connects with estate and tax planning. If you have questions about how the SECURE Act impacts you, it makes sense to sit down with an experienced attorney, financial planner, and/or licensed tax professional to ensure that your plans consider the SECURE Act.