New law makes big changes to retirement plans

submitted by E. Garrett Gummer, III, Esquire –

President Trump has signed a spending bill that makes major changes to retirement plans.

The new law is designed to provide more incentives to save for retirement, but it may require workers to rethink some of their planning. 

The Setting Every Community Up for Retirement Enhancement (SECURE) Act changes the law surrounding retirement plans in several ways.  Below are some of the important changes

*Stretch IRAS. The biggest change eliminates “stretch” IRAs. Under current law, if you name anyone other than a spouse as the beneficiary of your IRA, the beneficiary can choose to take distributions over his or her lifetime and to pass what is left onto future generations (called the “stretch” option). The SECURE Act requires beneficiaries of an IRA to withdraw all the money in the IRA within 10 years of the IRA holder’s death. This provision will apply to those who inherit IRAs starting on January 1, 2020.  

*Required minimum distributions. Under prior law, you have to begin taking distributions from your IRAs beginning when you reach age 70½. Under the new law, individuals who are not 70½ at the end of 2019 can now wait until age 72 to begin taking distributions. 

*Contributions. The new law allows workers to continue to contribute to an IRA after age 70½, which is the same as rules for 401(k)s and Roth IRAs.

*Withdrawals. The new law allows an early withdrawal of up to $5,000 from a retirement account without a penalty in the event of the birth of a child or an adoption. Currently, there is a 10% penalty for early withdrawals in most circumstances. 

Given these changes, you may need to consult with your attorney to reevaluate your estate plan.