Americans are living longer and working well past the traditional retirement age of 65 years old. Approximately one-quarter of working Americans say they plan on not retiring, according to an Associated Press- NORC Center for Public Affairs Research poll. For many, the reason is because they cannot afford to retire, forcing them to stay in the workforce longer than they would like. A bill that was recently signed into law in December 2019, the Setting Every Community Up for Retirement Enhancement (Secure ACT), aims to make it easier for workers to save money for retirement.
The Secure ACT imposes several changes on estate planning and retirement rules that could make it easier for those who work for small businesses, work part time, or have low income to save for retirement.
The maximum age for traditional IRA contributions prior to the Secure Act was 70 ½ years old. Under the new provisions, you may continue to make contributions to your traditional IRA past 70 ½ if you are still working. However, this change will apply only to contributions for tax year 2020, so the 70 ½ age limit still applies for the upcoming 2019 tax year.
Parents may take birth or adoption distribution from a qualified contribution plan without facing the typical ten percent early withdrawal penalty if the money is taken out within one year of the birth or adoption. Those who do not have enough saved to cover the costs associated with childbirth or adoption may now make penalty-free withdrawals of up to $5,000 per parent.
Under the new law, the required minimum distribution age is 72 for those who turn 70 ½ during calendar year 2020. Those who have already turned 70 ½ and have begun taking required minimum distributions from their IRA or 401(k) should continue to do so.
Prior to the Secure Act, long-term, part-time workers were not allowed to participate in their company’s 401(k) program if they worked less than 1,000 hours per year. Now, employers with 401(k) plans must offer a plan to employees who either worked more than 1,000 hours a year or 500 hours over three consecutive years.
Previously, beneficiaries of inherited retirement accounts could stretch their distributions over their life expectancy. Under the Secure Act, certain designated beneficiaries must now withdraw the entire balance within ten years of the account owner’s death with the exceptions of surviving spouses, minor children, chronically ill beneficiaries, and those who are less than ten years younger than the account holder.
If you have questions regarding the Secure Act of 2020 or retirement in general, contact one of our experienced lawyers today. Our dedicated Media estate lawyers at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthews & Auslander, P.C. can explain your legal options and assist you with estate and retirement planning. Contact us online or call us at 610-565-3701 for a free consultation. Located in Media and West Chester, Pennsylvania, we also serve clients in Delaware County, Chester County, and Montgomery County.
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