Key takeaways—The SECURE Act: Repeals the maximum age for traditional IRA contributions. Increases the required minimum distribution (RMD) age for retirement accounts to 72 (up from 70½). Allows long-term, part-time workers to participate in 401(k) plans. Offers more options for lifetime income strategies.
The Setting Every Community Up for Retirement Enhancement Act, known as the Secure Act, is legislation that changes some IRA and 401(k) rules, including the ability to delay distributions, reduced flexibility for inherited IRAs and penalty-free withdrawals for new parents.
The Secure Act made major changes to the RMD rules. If you reached the age of 70½ in 2019 the prior rule applies, and you must take your first RMD by April 1, 2020. If you reach age 70 ½ in 2020 or later you must take your first RMD by April 1 of the year after you reach 72.
Those 50 or older can make catch-up contributions to workplace retirement plans. The current limits for 2020 are $6,500, except that the limit is $3,000 for SIMPLE plans. The legislation would increase these limits to $10,000 ($5,000 for SIMPLE plans) for individuals who are 60 or older.
In addition to penalty-free early withdrawals, the CARES Act also expanded hardship loans from employer-sponsored retirement accounts—such as 401(k), 403(B), and 457s—until Sept. 22, 2020. Under the CARES Act, plan participants were allowed to borrow up to 100% of the vested balance or $100,000, whichever was less.
This credit would apply to small employers with up to 100 employees over a 3-year period beginning after December 31, 2019 and applies to SEP, SIMPLE, 401(k), and profit sharing types of plans. If the retirement plan includes automatic enrollment, an additional credit of up to $500 is now available.
A new bipartisan retirement bill has perks for seniors and savers shouldering student debt. The legislation, proposed by House lawmakers on Tuesday, would raise the age at which seniors must start drawing money from their 401(k) plans and individual retirement accounts to 75.
You reach age 70½ after December 31, 2019, so you are not required to take a minimum distribution until you reach 72. You reached age 72 on July 1, 2021. You must take your first RMD (for 2021) by April 1, 2022, with subsequent RMDs on December 31st annually thereafter.
You can take your annual RMD in a lump sum or piecemeal, perhaps in monthly or quarterly payments. Delaying the RMD until year-end, however, gives your money more time to grow tax-deferred.
The SECURE Act Changes the RMD Age Permanently, Beginning in 2020. ... Each year after the 70½ year, an RMD must be taken by December 31. This means two RMDs were required in the IRA owner's second RMD year if the first RMD was delayed until April 1. The SECURE Act increased the starting age for RMDs to 72.
401(k) Contribution Limits for 2021
The total amount an individual can contribute to their 401(k) in the new year is the same as for 2020. You can put up to $19,500 of your income into a 401(k) account in 2021. You'd have to save $1,625 each month to be able to reach the maximum contribution amount.
You can't keep your funds in a retirement account indefinitely. Generally, you're required to start taking withdrawals from your traditional IRA when you reach age 70 ½ (unless you're still working, under some plans). Roth IRAs, however, don't require withdrawals until the owner of the account dies.
The new bill, which is officially named the Securing a Strong Retirement Act, would require most employer-sponsored retirement plans to automatically enroll workers, make it easier for student-loan borrowers to amass savings and lower retirement plan administration costs for small businesses, among other measures.
Yet No Comments