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Navigating New Rules for Your Retirement Account

| January 22, 2020
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What You Need to Know About the SECURE Act

 The SECURE Act became law on December 20, 2019 and includes several areas of change within its thirty provisions that impact retirement accounts, such as Individual Retirement Accounts (IRAs) and 401(k)s. While many of these provisions are administrative in nature, major rule changes governing contributions and required minimum distributions (RMDs) may require owners of retirement accounts to take action in order to minimize consequences to their overall retirement plans.

The three changes with broadest implications:

  1. Contributions from wages to a traditional IRA may now be made no age limit. Previously, contributions were limited to those younger than 70 ½.
  2. For those that attain age 70 ½ after December 31, 2019, the first required minimum distribution from a retirement plan or retirement account is now at age 72. Previously, distributions were required to begin at age 70 ½.
  3. Most non-spouse beneficiaries of a retirement account must distribute the entire account within 10 years of the retirement account owner’s death. Previously, these retirement accounts could be distributed over the beneficiary’s lifetime, a strategy commonly referred to as the “Stretch IRA.”

We have put together the following Proactive Action Plan to help you and your advisors navigate how these new retirement account rules may impact you:

Step 1. Review Your Beneficiaries

Trusts that have been named as beneficiaries may need to be revised. Coordinating beneficiary designations with your overall goals may help reduce your beneficiaries’ tax burden.

Step 2. Review Your Retirement Income Plan

You should review your current retirement income plan to determine impacts in light of these new rules and to determine how best to distribute from your retirement account and provide for beneficiaries with minimal tax impacts.  This should be considered in conjunction with your Social Security benefits.

Step 3. Review Your Legacy & Estate Plan

If you planned to only withdraw the minimum from your retirement account and leave the balance to your beneficiaries, you should review alternative ways to achieve your legacy goals. For example, if you currently regularly give to charity, it could be wise to begin using retirement account assets to make those donations and leave other assets to beneficiaries that have less of a tax impact.

Step 4. Review Your Overall Tax Plan

Making changes to your financial plan will likely have tax implications and should be done only in consultation with your tax professional.

Have Questions? Reach out to your Level Four Advisor for more information!

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