We live in a world where the average life expectancy is increasing every decade. Is that a good thing? Yes, I believe it is, as long as we practice healthy lifestyle habits.
But what does it mean for our retirement assets? As you’ll see below, the Secure Act legislation is keeping up with life expectancy and making it easier for all of us to make sure our money will throughout our lifetime.
What does this mean for you? Well, it depends upon many elements discussed below.
- Securing a Strong Retirement Act unanimously passed by Ways & Means Committee this is 146 pages long. That’s a lot of information to sit down and read on your own, so we have compiled a list of the highlights.
The Securing a Strong Retirement Act of 2020 will:
- Promote savings earlier for retirement by enrolling employees automatically in their company’s 401(k) plan, when a new plan is created;
- Create a new financial incentive for small businesses to offer retirement plans;
- Increase and modernize the existing federal tax credit for contributions to a retirement plan or IRA (the Saver’s Credit);
- Expand retirement savings options for non-profit employees by allowing groups of non-profits to join together to offer retirement plans to their employees;
- Offer individuals 60 and older more flexibility to set aside savings as they approach retirement;
- Allow individuals to save for retirement longer by increasing the required minimum distribution age to 75;
- Allow individuals to pay down a student loan instead of contributing to a 401(k) plan and still receive an employer match in their retirement plan;
- Make it easier for military spouses who change jobs frequently to save for retirement;
- Allow individuals more flexibility to make gifts to charity through their IRAs;
- Allow taxpayers to avoid harsh penalties for inadvertent errors managing an IRA that can lead to a loss of retirement savings;
- Protect retirees who unknowingly receive retirement plan overpayments; and
- Make it easier for employees to find lost retirement accounts by creating a national, online, database of lost accounts.
Full text of the legislation is available HERE.
The Act well increase RMD age Requirement Minimum Distributions as of Jan 2021 the distribution for your retirement was increased to 72 that means you do not need to withdraw until you are 72 and you can continue to make deposits as long as you are earning an income.
In 2022 the age increase to 73 so if you are 73 in 2022 you will be required to have RMD’s you can continue to contribute as long as you continue to earn an income until age 73.
In 2029 the age will go to 74 and you will also be required to do RMD’s at that time also you can continue to contribute to your retirement until 74 if you continue to earn an income.
Your next important birthday will be 75 in 2032 and you will not need to have RMD’s until you are 75 in 2032 you can continue to contribute to your account as long as you are earning income.
No RMDs for those with less than $100,000 in retirement savings
RMD’s are Indexed for inflation
Retirement Plans and Loans
Loans cannot be taken from:
- SIMPLE IRA
Loans are possible from:
- Qualified plans that satisfy the IRC §401(a) requirements
- Annuity plans that satisfy IRC §403(a) or (b)
Make sure you contact your employer and find out what you can or cannot do with loans in retirement accounts.
Green Valley Tax Services Inc. is a leading tax preparer in Napa and surrounding areas. We focus on tax preparation, bookkeeping, and representing clients in tax issues with the IRS. Please contact us for a consultation.