Happy 2020! New Year, New Rules
Kicking off the New Decade with NEW retirement planning laws and to no avail, the Financial Industry loves its acronyms. The Setting Every Community Up for Retirement Enhancement (SECURE) Act passed the U.S. House of Representatives last May 2019 and has been largely forgotten about since, until last month when the Senate finally passed the same legislation.
· Delays the date when people (whether retired or not) would have to start taking distributions out of their IRAs (called required minimum distributions, or RMDs) until age 72. This is not a huge concession, since the previous start date for RMDs was age 70½.
o With RMDs now starting at age 72, this change gives planners an additional 1½ years to do Roth IRA Conversions without having to compete against the RMDs. With a general goal of converting taxable money from a Trad IRA into a Roth IRA at lower tax rates today than you expect to pay in the future, on top of not being subject to RMDs.
· Inherited IRAs no longer qualify for the Stretch IRA provision and must be distributed, in full, by the end of the tenth year after it is received, and all ordinary income taxes would be due at the time of the distribution. As a result, many tax practitioners are recommending that wealthier individuals look at the possibility of doing partial Roth Conversions while they’re still alive.
Other Notable Changes:
· Allows people who are working beyond age 70 1/2 to make IRA contributions.
· Reduces administrative costs for small businesses to offer a 401(k).
· Safe harbors Annuities into the 401k market. This is where the lobbyists came in… welcoming the salespeople selling high-commission annuities to the 401(k) market, so everybody will need to be careful.
Reach out to us if you want to learn more about Roth Conversions. We were also asked by ETF.com for some “Top ETF Picks for 2020”. Check out our Dark Horse candidate heading into 2020 in the top link below: