INDUSTRY INSIGHT
FINANCIAL FOCUS
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LOOK FOR CHANGES IN
RETIREMENT PLANS
I
t might not have made the headlines, but a recently passed
piece of legislation could affect the IRAs and 401(k)s of millions
of Americans beginning in 2020. So, if you have either of these
accounts, or if you run a business, you’ll want to learn more.
The new laws, collectively called the Setting Every Community
Up for Retirement Enhancement (SECURE) Act, include these
noteworthy changes:
• Higher age for RMDs – Under prior law, you must start taking
withdrawals—known as required minimum distributions, or
RMDs—from your traditional IRA and 401(k) or similar employer-
sponsored plan once you turn 70½. The new law pushes the date to
start RMDs to 72, which means you can hold on to your retirement
savings a bit longer.
• No age limit for traditional IRA contributions – Previously, you
could only contribute to your traditional IRA until you were 70½,
but under the SECURE Act, you can now fund your traditional IRA
for as long as you have taxable earned income.
• Limitation of “Stretch IRA” provisions – Under the old rules,
beneficiaries were able to stretch taxable RMDs from a retirement
account over his or her lifetime. Under the SECURE Act, while
spouse beneficiaries can still take advantage of this “stretch”
distribution, most non-spouse beneficiaries will have to take all the
RMDs by the end of the tenth year after the account owner passes
away. Consequently, non-spouse beneficiaries who inherit an IRA
or other retirement plan could have tax implications due to the
need to take larger distributions in a shorter timeframe.
• No early withdrawal penalty for IRAs and 401(k)s when a new child
arrives – Typically, you must pay a 10% penalty when you withdraw
funds from your IRA or 401(k) before you reach 59½. But now, with
the new rules, you can withdraw up to $5,000 from your retirement
plan without paying the early withdrawal penalty, as long as
you take the money within one year of a child being born or an
adoption becoming final.
Some provisions of the SECURE Act primarily affect business
owners:
• Multi-employer retirement plans – Unrelated companies can
now work together to offer employees a 401(k) plan with less
administrative work, lower costs and fewer fiduciary responsibilities
than individual employers now encounter when offering their own
retirement plans.
• Tax credit for automatic enrollment – The new law provides
a tax credit of $500 for some smaller employers who set up
automatic enrollment in their retirement plans. And a tax credit
for establishing a retirement plan has been increased from $500 to
$5,000.
• Use of annuities in 401(k) plans – It will now be easier for
employers to consider including annuities as an investment option
within 401(k) plans. Previously, many businesses avoided offering
annuities in these plans due to liability concerns related to the
annuity provider, but the new rules should help reduce these
concerns.
The SECURE Act is the most significant change to our retirement
savings system in over a decade. We encourage you to contact
your financial advisor, tax professional and estate planning attorney
to assess the potential impact on your investment strategies and
determine any possible tax and estate planning implications of the
SECURE Act.
This article was written by Edward Jones for use by your local Edward
Jones Financial Advisor.
Matt Dudkowski, AAMS® | Financial Advisor | 1007 Mt Royal Blvd. Pittsburgh, PA 15223 | 412.487.3300
[email protected] | www.edwardjones.com | Member SIPC
Matt Dudkowski has been a financial advisor with Edward Jones since 2002, serving individual investors in
the Pittsburgh area from his Shaler Township office. In January of 2015, Dudkowski accepted an invitation
to become a limited partner with the firm.
Since joining Edward Jones, Dudkowski has obtained the professional designation of AAMS®. Prior to Edward
Jones, Dudkowski, as a CPA, worked at the H.J. Heinz Company, and at Ernst & Young LLP.
He currently serves on the board of directors for Keystone Wellness Programs, a local nonprofit organization.
A native of Butler County and a graduate of the University
of Notre Dame, Dudkowski resides in Gibsonia with his wife,
two sons and daughter.
SHALER ❘ SPRING 2020
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