SECURE Act on the MoveDecember 17, 2019 -
Categorized in: IAG News
After languishing for almost seven months, the SECURE Act is on the legislative move!
On May 23, 2019, the House of Representatives passed the SECURE Act by a vote of 417-3 and it stalled in the Senate.
Just yesterday the SECURE Act was folded into H.R. 1865 – one of the giant year-end spending bills that are likely to pass both the U.S. House of Representatives and the U.S. Senate this week.
The temporary budget that is currently funding the government expires after Friday, December 20.
Thus, the President will have to make a fairly quick decision on whether to sign these budget bills.
Here are some of the key details in the SECURE Act which could impact you if it is signed into law by the President in its current form:
Change required minimum distribution age
- If you will turn 70.5 AFTER December 31, 2019, your required beginning date would be moved from the year you turn 70.5 to the year you turn 72.
- This change would NOT affect taxpayers who are 70.5 on December 31, 2019. If you are age 70.5 by December 31, 2019, you would continue to be required to take your Required Minimum Distributions as under current law.
- This could also impact when you are eligible to make Qualified Charitable Distributions, but that is not clear at this time.
Change beneficiary distribution rules
- If you die after December 31, 2019, your nonspousal beneficiaries would no longer be able to stretch distributions from your retirement account over their lifetimes. Instead, they would need to empty your retirement accounts by December 31 of the 10th year after your passing.
- Some exceptions and special rules would apply for beneficiaries who are disabled, have a chronic illness, are not more than 10 years younger than you, or are minor children.
Permit IRA contributions after age 70.5
- Starting in 2020, taxpayers would have the ability to continue to make traditional IRA contributions after their required beginning date.
Penalty-free withdrawals for birth or adoption
- Starting in 2020, each taxpayer would be able to take a penalty-free withdrawal of up to $5,000 from their retirement account within one year of a child’s birth or adoption finalization.
- Additionally, taxpayers would have the unlimited ability to return the funds they withdrew to their retirement plans in the future as a rollover.
2019 expansion of tax-free distributions from 529 plans
- Up to $10,000 per lifetime to pay student loan principal or interest.
Please remember this bill is not law yet and could be changed at any time. Additionally, in some cases states will have to update their tax laws to comply with any new provisions which could result in taxable state income. There are also numerous additional provisions included in the bill not summarized here that could impact your future planning.
As always, we are monitoring legislation changes very closely to determine if they could impact your financial plan.
Source: House Ways and Means Committee Report 116-65; House Rules Committee Print 116-44
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Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.