Will Your Children Inherit the Money You Think They Will?
The Secure Act of 2019: Setting Every Community Up for Retirement Act
More than 45% of Americans over the age of 55 have no retirement savings or pensions!!! If you have to rely on social security, you will be living in poverty.
The SECURE Act passed in the House (federal) with a 417-3 winning vote. The Senate’s bill (RESA) has not had much movement. SECURE is not a law yet.
SOME POSITIVES (DEPENDING ON YOUR INDIVIDUAL SITUATION):
The Act changes the maximum age for IRA contributions from 71 ½ to 72 years old. Currently, everyone who reaches the age of 70 ½ must take a certain percentage of their retirement assets as income (Required Minimum Distribution or RMD) and pay tax on this income. Under SECURE, your fund will continue to grow tax-free longer, with 72 years as the new RMD age.
The Act will require employers to permit long-term (2 years or more) part-time employees to be able to participate in 401(k) plans. Currently, employers are allowed to exclude part-time employees from their 401(k) plans.
Small businesses would be able to join together and create group plans
Parents will be able to withdraw up to $5000 from retirement accounts penalty-free within a year of a child's birth or adoption for qualified expenses, and they will be able to withdraw up to $10,000 from 529 plans to repay student loans.
Would allow employer-sponsored 401(k) plans to add annuities as investment options on the menu
SOME NEGATIVES
The Act appears to provide that any inherited retirement money, even non-taxable (Roth retirement monies), will be taxed as income to the beneficiary (except spouses and children).
Your children will not be able to stretch the period for RMDs to their estimated lifetime. The stretch IRA will be gone! Your children’s inheritance of retirement monies will be worth less because of the taxes due under the proposed SECURE Act.
Call us at 609-924-2900 if you want an appointment to discuss this or estate planning as relevant to your situation or visit our web site at www.strichlaw.com.
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