In December of 2019, President Donald J. Trump signed the Setting Every Community Up for Retirement Enhancement Act, which took effect on January 1, 2020. There are various ways in which this act may affect your retirement plan, no matter your age. Read on and speak with our knowledgeable Maryland estate planning attorney to learn more about retirement planning and how the Act may affect you.
What changed in the SECURE Act?
Many rules regarding retirement accounts were modified in the SECURE Act. Some of those changes are as follows:
- There is not a new exception to the early withdrawal penalty
- Certain individuals are now eligible to contribute to retirement accounts
- The minimum distribution age was changed from 70 ½ to 72: In previous years, individuals who sought to withdraw from their traditional IRA must have done so by April 1 of the year after turning 70 1/2. However, now that the age has changed to 72, ITA owners can defer paying tax on these funds, allowing them to continue to grow.
- The age limit for IRA contributions was abolished: In the past, if you had an individual retirement account, you could only contribute to that account once you turned 70 1/2, though now, under the new act, you can contribute to your IRA as long as you are still in the workforce.
- You must now receive inherited retirement account distributions within 10 years: Under the new law, in many cases, beneficiaries of retirement account owners who pass away after 1/1/2020 may have to withdraw various assets in an inherited IRA or 401(k) within 10 years of their passing.
- New parents may now withdraw assets penalty-free: Before this new law was passed, if you are someone who was looking to withdraw from your IRA or 401(k) before the age of 59 1/2, you will generally have to face a 10% penalty, however, under the new law, you can withdraw from certain retirement accounts, under certain circumstances, penalty-free. Additionally, if you are someone who has recently had a child, you may take out a $5,000 withdrawal after your child is born or adopted.
- Long-term part-time employees can now create 401(k) plans: This is fantastic news for part-time, long-term employees, as in years past, part-time employees were required to work at least 1,000 hours over the course of a 12-month period to contribute to their 401(k). Now, under the new law, as long as you are someone who is 21 years or older and work at least 500 hours in a 12-month period for three consecutive years, you can start contributing to your 401(k) plan.
Contact our experienced Maryland firm
The attorneys at JD Katz have years of experience compassionately guiding clients in Maryland through the estate planning and administration process. Our firm also has experience with matters of elder law, business law, tax law, and litigation. For a legal team that will put your needs first, contact JD Katz today.