Secure Act Passes Into Law – Now What?

Secure Act Passes Into Law

Now What?

This tax act has many implications we will highlight a few from a high level.  We recommend 2020 as a time to review the personal and business plans you currently have in place.

The first, and in my opinion, biggest impact is the elimination of the Stretch IRA for anyone except for beneficiaries that are current spouses, disabled, chronically ill, minor children, and individuals not more than 10 years younger than the decedent.    This does include Roth IRA’s, so essentially we have a new wealth tax.

Required minimum distribution age was raised from 70 ½ to age 72, so if you were born on or after July 1, 2049 your RMD doesn’t start until the year you turn 72.

You can now take a 10% penalty free distribution of up to $5,000 from a qualified plan or IRA because of the birth or adoption of a child.

The introduction of a $10,000 distribution from 529 plans to pay towards student loans, this is a single lifetime limit per person.

529 plans have added new qualified expenses to include apprenticeships programs that include fees, books, supplies and equipment, appropriately registered with the Department of Labor.

New tax credits available for business owners to offer retirement plans to your employees.

The Secure Act also opens the door for Annuities in 401k plans.

Widens access to multiple employer plans for small business and eliminates the one employer doesn’t meet plan requirements the entire plan fails for all rule.

The SECURE Act makes any income subject to the Kiddie Tax, taxable at the child’s parents’ marginal tax rate.  This could impact planning strategies like gifting highly appreciated stock to children.

There are way too many changes to highlight in this post so as we enter 2020, I highly recommend you set up some time to discuss your current business and personal situation to see if the Secure Act requires some adjustments to your personal and business plans.

Written by:  Todd Rohrer, Client Advisor

These are the opinions of Todd Rohrer and not necessarily those of Cambridge, are for information purposes only, and should not be construed or acted upon as individualized investment advice.  Investing involves risk.  Depending on the types of investments, there may be varying degrees of risk.  Investors should be prepared to bear loss, including total loss of principal.  The strategies discussed herein are not designed based on the individual needs of any one specific client or investor.  In other words, it is not a customized strategy designed on the specific financial circumstances of the client.  However, prior to opening an account, Cambridge will consult with you to determine if your financial objectives are appropriate for investing in the model.  You are also provided the opportunity to place reasonable restrictions on the securities held in your account.

  1. R.1994 – Setting Every Community Up for Retirement Enhancement Act of 2019