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As a Financial Advisor at Austin Asset, I am routinely keeping up with changes to tax laws and how that impacts our financial planning assumptions.  One of the largest reforms just occurred and here is what you need to know:

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed by the House in Summer 2019, then passed by the Senate and signed into law by President Trump in December 2019. It provides multiple tax changes for individuals and small employers, with several changes applying to retirement accounts.  Some of the changes include:

  • You can now contribute to your traditional IRA or Roth IRA no matter how old you are, if you have earned income.
  • Your Required Minimum Distributions (RMD) can now be delayed until April 1st following the year you turn age 72 (instead of age 70½).  This new rule only applies to people who had not turned age 70½ by end of 2019.
  • If you inherit an IRA from someone other than your spouse, you will no longer be allowed to stretch the distributions over your life expectancy.  All distributions from an Inherited IRA must occur within 10 years.  Note: This 10-year rule does not apply to beneficiaries who are spouses, disabled, chronically ill, minor children, or not more than 10 years younger than the decedent.  Also, the 10-year rule only applies if the decedent passed away after the year 2019.
  • You can now take a penalty-free withdrawal of up to $5,000 from your IRAs and other qualified plans due to the birth or adoption of a child.
  • There are new and increased tax credits employers can take to encourage them to set up and maintain retirement plans for their employees.
  • Part-time employees who work at least 500 hours in three consecutive years are eligible to participate in their employer’s 401(k).
  • The employer can set up employer-funded retirement plans after year-end up to the date of the employer’s tax return.
  • You can now use 529 College Savings Plans for student loan payments (within limits) and certain apprenticeships.
  • Kiddie tax on children’s income is now taxed at the parent’s marginal tax rate, instead of the higher Estates and Trusts tax rates.

Here are some things to keep in mind:

  • With the SECURE Act, converting part of your traditional IRA to a Roth IRA may be more advantageous than it was before.  Since the RMD beginning date has been raised from age 70½ to age 72, you may have more lower income years available when Roth conversions make the most sense.  And if your children eventually inherit an IRA from you someday, inheriting a Roth IRA is much better tax-wise than inheriting a traditional IRA.  Your children will likely be subject to the new 10-year distribution rule either way, but unlike traditional IRAs, the distributions from a Roth IRA are not taxable.
  • If your retirement accounts name a Trust as the beneficiary, the SECURE Act may have a negative effect on how any Inherited IRA distributions could be distributed and taxed to your heirs.  We recommend that you visit with your estate planning attorney if your retirement accounts name a trust as the beneficiary.
  • With the SECURE Act, even though the RMD age has been increased to age 72, you can still make Qualified Charitable Distributions (QCDs) beginning at your age 70½.  You can also continue contributing to your IRA no matter how old you are, as long as you have earned income.

The rules can be complicated, so we encourage you to talk to your financial advisor or tax advisor to determine what strategies you should be using.


Jim is a Financial Advisor at Austin Asset, where he seeks to bring clarity and purpose to wealth through authentic and enduring relationships.  For life.

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