There’s a Retirement Crisis in America!
Americans are struggling to save enough for retirement, therefore the House of representatives has passed “Setting Every Community Up for Retirement Enhancement Act of 2019” or SECURE Act by a bi-partisan vote of 417-3. The Senate is expected to move quickly on this bill which could occur before the August recess. How will this bill help to address the savings gap which is impacting millions of Americans?
- This bill increases the beginning age for required minimum distributions (RMDs) from retirement plans to age 72 from the earlier age 70½ beginning in tax year 2020. The bill will not impact those who have already started taking RMD’s and reached age 70 ½ in the year 2019 or earlier.
- The bill eliminates the ability for most non-spouse beneficiaries to stretch inherited retirement account distributions over their lifetime. The beneficiary would instead need to completely distribute the retirement account within ten years of the inheritance. No minimum distribution would be required each year as long as the entire balance is distributed by the end of the tenth year. The only individuals who will not be subject to the 10-year rule are surviving spouses, minor children until they turn the age of majority, disabled or chronically ill individuals, or individuals who are within 10 years of the original account holders age.
- The maximum age for Traditional IRA contributions (deductible or non-deductible) would be removed. Current law forbids Traditional IRA contributions after reaching age 70½. The legislation would align the rules for Traditional IRA and Roth IRA contributions to be allowed at any age, subject to the receipt of earned income in order to qualify.
- The bill provides for penalty-free distributions of up to $5,000 from a retirement plan upon the birth or adoption of a child. The bill will also allow for these funds to be contributed back into the retirement plan at a later date.
- The bill extends the deadline for businesses to establish a retirement plan from the close of the tax year until the tax return filing due date.
- The bill expands the use of 529 plan accounts to cover up to $10,000 of qualified student loan payments and the costs associated with a registered apprenticeship.
- The bill will allow for part time and temporary workers to contribute to their company’s employer-sponsored retirement plan.
- The bill also includes several provisions to ease the administrative burden and cost for businesses to set up and maintain retirement plans, with the ultimate goal of making retirement plans more widely available.
Contact us at HFS Wealth Advisors to see if the Senate has passed the SECURE ACT, and to check out how this may affect your Retirement Plan moving forward.
*To see the entire 478 page Report on H.R. 1994 go to https://www.congress.gov/116/crpt/hrpt65/CRPT-116hrpt65.pdf
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.
Written by: Todd Rohrer, Client Advisor