Washington just passed a new law regarding retirement accounts called the SECURE Act (Setting Every Community for Retirement Enhancement). A few of the notable elements include:
- Offering incentives for small businesses to band together with other business retirement plans for lower-shared costs; offer part-time employees access to retirement plans, and provide automatic enrollment for retirement plans.
- Increasing the age for Required Mandatory Distributions from IRA, 401(k), and 403(b) accounts. Withdrawals must be made (and income tax paid) according to a ratio starting at age 72, an increase from age 70 1/2 to reflect longer lifespans. Also, they removed the maximum age to contribute to a traditional IRA.
- Annuities (which are already problematic and complicated products) are now allowed inside retirement accounts. In this location, there is an extra mess determining and handling whether any particular annuity meets the new criteria to be passed to a beneficiary.
- For inherited IRAs, there is now a withdrawal limit of just when it used to be that you could withdraw the money over the beneficiary’s lifetime (called a stretch IRA). This can change the arithmetic in favor of converting a traditional IRA to a Roth IRA for many people. So financial advisers are already experiencing a wave of Roth IRA conversions to eliminate the income tax paid by beneficiaries. (Not to worry, tax experts have a way around this with a Charitable Remainder Unitrust.)
- Reduces the income tax on survivor benefits to children of fallen U.S. soldiers, from 37% to their parents’ lower income rate.
You can read the entire bill here: https://docs.house.gov/meetings/WM/WM00/20190402/109255/BILLS-116HR___ih.pdf