Trending Now :

Re-Drafting the 2023 IPO Class The Interest-Free Installments Economy FICO Scoring Models: Explained Fed Holds Off on Rate Hike Rise of the Global Middle Class: Opportunities and Challenges Protect Yourself from Financial Scams Money Motivators Mortgage Rate Buydown What Does the Hot Inflation Report Mean for the Housing Market How Do You Build Wealth: Invest in Yourself Times Up for Programmed Money Biggest Financial Crimes: Countrywide Quantitative Tightening, Inflation, & More The Stock Market Is On Sale Investors Need to Netflix and Chill Credit Card Fixed-Interest Loans: Explained Are You Money Smart? Build Your Credit for Free Filing Your Taxes in 2022 Credit Cards that Offer 2% Cashback on All Purchases Navient Ordered to Cancel Student Loans U.S. Mortgage Interest Rates Soaring Two Big Banks Cut Overdraft Fees 2022 IPO DRAFT CLASS: Ranking the Top 10 Prospects Re-Drafting the 2021 IPO Draft All You Need to Know about Buy Now Pay Later companies Credit Card Sign-Up Bonus or SUB The Best Credit Card for the Middle-Class Make An All-cash Offer with No Cash Capitalism Always Ignores Politics All You Need to Know about the Financial crisis of 2007-2008 American Families Face Serious Rent Burden Savings Is An Expense You Can’t Build Generational Wealth If You Are Broke IT’S OFFICIAL: Robinhood is a Meme Stock All You Need to Know About Biden Mortgage Modifications & Payment Reductions Apple Card 2nd Year Anniversary: Should You Get It Now Wells Fargo to Pull Customers Personal Lines of Credit The Rise of Individual Investors The US Housing Market Is Booming. Is a Crash Ahead? Financial Literacy: How to Be Smart with Your Money Non-Fungible Token (NFT):EXPLAINED SKYROCKETED CEO PAY & LONG LINES AT FOOD BANKS Amazon Workers Want to Unionize Another Major City Piloted Universal Basic Income The New Bubble: SPACs SUBMIT YOUR PPP ROUND 2 APPLICATION BEFORE MARCH 31ST Robinhood-GameStop Hearing & Payment for Order Flow Guess Who’s Coming to Main Street Democratic Senators Say No to $15 Minimum Wage BEZOS OUT! President Biden Most Impressive Act Went Unnoticed: CFPB Biden $1.9 Trillion Stimulus Package 2021 IPO DRAFT CLASS: Ranking the Top 10 Prospects $25 Billion Emergency Rental Assistance NO, TESLA IS NOT WORTH MORE THAN TOYOTA, VOLKSWAGEN, HYUNDAI, GM, AND FORD PUT TOGETHER AMAZON TO HAND OUT ITS WORKERS $300 HOLIDAY BONUS Where Does the American Middle-class stand on Student Debt Relief? Joe Biden’s Economic Plan Explained 4 TYPES OF BAD CREDIT REPORTS AND HOW TO FIX THEM What Is the Proper Approach to Not Buy Too Much House? FISCAL STIMULUS PLANS STILL IN ACTION How to Pick Investments for Your 401(k) 10 Simple Ways to Manage Your Money Better All You Need to Know about Reverse Mortgage All You Need to Know about Wholesale Real Estate Credit card Teaser Rates AVERAGE CREDIT CARD INTEREST RATE SURGES TO 20.5 Percent Trump Signs 4 Executive Orders for Coronavirus Economic Relief The Worst American Economy in History WHY CREDIT CARDS MINIMUM PAYMENTS ARE SO LOW? 10 BIGGEST COMPANIES IN AMERICA AND WHO OWNS THEM White House Wants to End the Extra $600-A-Week Unemployment  10 Countries That Penalize Savers FEWER CREDIT CARD BALANCE-TRANSFER OFFERS ARE IN YOUR MAILBOX Private Payrolls and the Unemployment Rate SHOULD YOU BUY INTO THE HOUSING MARKET RESILIENCY? WILL WE GET A SECOND STIMULUS CHECK The Child Tax Credit and Earned Income Tax Credit THE RETURN OF BUSINESS CYCLES Should You Request a Participant Loan or an Early 401(k) Withdrawal? Homebuyers Should Not Worry about Strict Mortgage Borrowing Standards The Potential Unintended Consequences of Mortgage Forbearance All Business Owners Need to Know about the Paycheck Protection Program 10 MILLION UNEMPLOYMENT CLAIMS IN TWO WEEKS HOW WILL THE GLOBAL MIDDLE-CLASS RECOVER FROM A SECOND ECONOMIC RECESSION IN A DECADE? WILL U.S. CONSUMERS CONTINUE TO SPEND? HOW’S YOUR 401(k) PRESIDENT TRUMP SIGNS $2.2 TRILLION CORONAVIRUS STIMULUS BILL MIDDLE-CLASS NIGHTMARE: MORE THAN 3.3 AMERICAN FILED FOR UNEMPLOYMENT CLAIMS IN THE US LAST WEEK. LAWMAKERS AGREED ON $2 TRILLION CORONAVIRUS STIMULUS DEAL CORONAVIRUS STIMULUS PACKAGE FAILED AGAIN IN THE SENATE APRIL 15 (TAX DAY) DELAYED DEMOCRATS AND REPUBLICANS DIFFER ON HOW $2 TRILLION OF YOUR TAX MONEY SHOULD BE SPENT YOU CAN DELAY MORTGAGE PAYMENTS UP TO 1 YEAR, BUT SHOULD YOU? 110 Million American Consumers Could See Their Credit Scores Change The Middle-Class Needs to Support Elizabeth Warren’s Bankruptcy Plan The SECURE Act & Stretch IRA: 5 Key Retirement Changes 5 Best Blue-chip Dividend Stocks for 2020 9 Common Bankruptcy Myths 401(K) BLUNDERS TO AVOID Government Policies Built and Destroyed America’s Middle-Class & JCPenney Elijah E. Cummings, Esteemed Democrat Who Led the Impeachment Inquiry into Trump, Dies at 68 12 Candidates One-stage: Who Championed Middle-Class Policies the Most WeWork: From Roadshow to Bankruptcy Stand with the United Auto Workers Formal impeachment Inquiry into President Donald Trump America Is Still a Middle-Class Country SAUDI OIL ATTACKS: All YOU NEED TO KNOW THE FEDERAL RESERVE ABOLISHED BUSINESS CYCLES AUTO WORKERS GO ON STRIKE Saudi Attacks Send Oil Prices Spiraling REMEMBERING 9/11 What to Expect from the 116th Congress after Their August Recess Should You Accept the Pain of Trump’s Trade War? 45th G7 Summit-President Macron Leads Summit No More Upper-Class Tax Cuts Mr. President! APPLE CARD IS HERE-SHOULD YOU APPLY? THE GIG ECONOMY CREATES A PERMANENT UNDERCLASS 5 REASONS IT’S SO HARD FOR LOW-INCOME INDIVIDUALS TO MOVE UP TO THE MIDDLE CLASS ARE YOU PART OF THE MIDDLE CLASS? USE THIS CALCULATOR TO FIND OUT? WELLS FARGO IS A DANGER TO THE MIDDLE CLASS The Financialization of Everything Is Killing the Middle Class
The SECURE Act
American Middle Class

The SECURE Act & Stretch IRA: 5 Key Retirement Changes

The estimated reading time for this post is 210 seconds

  • Congress passed, and President Trump signed the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The bi-partisan law made severe changes in how Americans save and withdraw from their retirement account.
  • The Secure Act now requires the inherited IRA to be distributed within ten years of the IRA owner’s death unless the beneficiary is a spouse, disabled, chronically ill, or a minor.
  • Your traditional IRA used to require you to take RMD the year you turn 70 ½.  The Secure Act prolonged that to 72. You have an additional 1 ½ years to let your funds grow tax-free.
  •  The law requires 401(k) plan administrators to provide lifetime income disclosure statements to plan participants.
  • Visit the Financial Middle-Class homepage for more stories

As of January 1, 2020, you can no longer stretch non-spouse inherited IRA, which is one of the significant retirement changes from the Secure Act.  While you were busy buying Christmas gifts, Congress changed how you save for retirement and how your heirs can spend their inheritance.

Congress passed, and President Trump signed the Setting Every Community Up for Retirement Enhancement (SECURE) Act.  The bi-partisan law made severe changes in how you save and withdraw from your retirement account.  Here are the five significant changes from the SECURE Act:

No More “Stretching” for IRAs

Your children or grandchildren cannot let their inherited individual retirement account (IRA) grows tax-free anymore.  Before the law, a 21-year old who inherited an IRA, funds in a 401(k), or any other defined contribution plan from her father or grandfather could take required minimum distributions (RMDs) over her own lifetime.  

Stretching the inherited IRA over the heir’s lifetime allows it to grow tax-free.  The Secure Act now requires the inherited IRA to be distributed within ten years of the IRA owner’s death unless the beneficiary is a spouse, disabled, chronically ill, or a minor if the beneficiary is a minor, the 10-year rule kicks in once she’s 18-years old.

Prolong Required Minimum Distribution (RMDs)

Unlike your employer’s 401(k) that does not require you to start taking money out until you leave your job, your traditional IRA used to require you to take RMD the year you turn 70 ½.  The Secure Act prolonged that to 72.  You have an additional 1 ½ years to let your funds grow tax-free. The law made no changes to the Roth IRA.

Lifetime Income Disclosure Statements/Annuity Information

 The law requires 401(k) plan administrators to provide lifetime income disclosure statements to plan participants.  Similar to credit card disclosure statements that show users how long it will take them to pay off the credit card and how much interest charges they will incur if they only make the minimum payment; the lifetime income disclosure statements will show plan participants how much money they could get each month, for the rest of their life, if they convert their 401(k) to an annuity.

The Secure Act also removed restrictions for 401(k) plan sponsors to offer annuities.  With the continuous talks about social security going bankrupt, converting a 401(k) to annuity can guarantee retirees a lifetime income.  However, you have to do your due diligence because surrender charges and many other fees can turn an annuity into a disastrous financial product.

Lower 401(k) Criteria for Part-Time Employees

Employers can omit part-time employees who work 1000 hours or fewer during the year from their 401(k) plan.  Now under the Secure Act, part-time employees who worked at least 500 hours per year for at least three consecutive years are eligible to participate in their employer’s 401(k) or other defined-contribution plans. 

The law has multiple ways to incentivize small businesses to offer retirement plans to their employees.  The Secure Act allows small businesses to band together to provide retirement plans for their employees and increases tax credit to reduce the cost of setting up new 401(k) plans. 

Have A Child on Us

The Secure Act lets you dig into your 401(k) or any other qualified retirement plan without any penalty. You and your partner can withdraw up to $10,000 out of your retirement accounts penalty-free.   You don’t get penalized, but you still have to pay taxes, and you have to withdraw the money within one year of the child’s birth or adoption.

BACK TO TOP
Author

Senior Accounting & Finance Professional|Lifehacker|Amateur Oenophile

Continue Reading
Click to comment

Leave Comment

Advertisement
Stock News / Jan 02, 2024

Re-Drafting the 2023 IPO Class

The estimated reading time for this post is 147 seconds The Initial Public Offering (IPO)...

Stock News / Dec 29, 2023

2024 IPO Draft Class

The estimated reading time for this post is 151 seconds 2024 IPO Draft Class: Ranking...

Stock News / Dec 22, 2023

Build Wealth with Boring Investments

The estimated reading time for this post is 314 seconds Due to their boredom, long-term,...