Are you wondering what the SECURE Act means for you? Whether you are in your childbearing years or 70 and a half, the changes will impact you and your financial plan.
(Click the featured times below to jump forward in the episode)
It’s rare for Congress to make changes to the laws surrounding IRAs and 401(k), so it’s important you understand the various changes and how they play a part in your financial decisions.
Before the SECURE Act, you couldn’t put any money into your IRA after 70 and a half. Now, as long as you have earned income then you can contribute to your IRA if you want. What is earned income? This is job-related income or compensation.
Another change that used to happen at 70 and a half was reaching the required minimum distribution age. Now, the age has shifted to 72 years old before you have to take your RMDs. So, if you are 70 now, when does this go into effect? It depends on when your birthday happened in the course of the last year. Make sure you understand when the rules apply based on your age.
For younger listeners, are you about to grow your family through birth or adoption? With the SECURE Act, you can take out $5,000 or less from your IRA or 401(k) without penalty (although you will still have to pay the taxes). Or are you receiving money from a fellowship or stipend? This money is now considered compensation, so you can contribute to an IRA.
Next week we’ll talk about the big impact of the changes related to inherited IRAs. These have also changed with the SECURE Act, so we plan to go into more detail in order to better understand how inherited IRAs will now be done.
Listen to the full episode or click on the timestamps below to hear six of the key changes in the SECURE Act.
[1:53] – Is the SECURE Act significant?
[2:41] – There is no maximum age to contribute to an IRA.
[4:38] – The required minimum distribution age is now 72.
[7:44] – Are you making qualified charitable deductions in retirement?
[9:49] – New parents can now take $5,000 or less out of your IRA or 401(k) without penalty based on the birth or adoption of a child.
[10:48] – Taxable fellowships and stipends are now considered compensation.
[11:43] – Inherited IRAs cannot be stretched out anymore, with a few exceptions.
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