How the Secure Act changes your financial future

The Secure Act went into effect on Jan. 1, 2020, and that has some major consequences for long-term financial planning and estate plans. Here’s what you need to know about how things have changed.

It’s easier to have a retirement plan

The Secure Act actually provides some tax incentives that encourage small businesses to establish 401(k) and 403(b) retirement plans. It also encourages employers to establish pooled plans. That means that retirement plans like these may be easier to access for more employees.

The age for required minimum distributions has changed

Congress also increased the age at which you’re required to take a required minimum distribution (and pay taxes on that money) from 70.5 to 72 (as long as you weren’t already 70 and one-half in 2019.

You can contribute to your retirement plan longer

If you have a traditional IRA plan, you were only allowed to contribute to the plan until you turned 70 years of age. The Secure Act makes it possible for you to contribute as long as you continue to be employed — which is reflective of the fact that people are living and working longer than they once did.

The rules on inherited retirement plans are different

The options your heirs may have regarding your IRA or pension plan if you pass away may have changed significantly due to the Secure Act. In particular, “stretch” trusts that doled out a beneficiary’s money over many years may no longer work because beneficiaries are required to withdraw the money within 10 years of your death (which means less deferred tax benefits).

If you have a trust set up for your children or other heirs, talk to your estate planning attorney today about those plans. They may need to be revised to accomplish your intentions.

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