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Changes with the SECURE Act to know about

401(k) contribution limit to rise
Posted at 7:03 AM, Feb 04, 2020
and last updated 2020-02-04 09:03:49-05

TUCSON, Ariz. — The Setting Every Community Up For Retirement Enhancement Act, or the SECURE Act, has some new rules that went into affect this year.

With individual retirement accounts, the required minimum distribution age is now at 72, instead of at 70 and a half.

"If you're thinking, 'Oh my goodness, I'm going to have to start taking income from my retirement asset and I don't really need the income right now. I want to actually defer that longer.' The exciting thing about this ruling, is that now you have until age 72 to defer that," said Tiana Ronstadt with Power Women Investing.

There used to be an age cap that said once you reach 70 and a half, you could no longer add to a retirement fun, even if you were still working. The SECURE Act got rid of that age cap; allowing folks to save to their retirement accounts for as long as they want to.

"So you're 82 and you're working and you want to save into an IRA, the good news is that you can continue to save well into your 80s," said Ronstadt.

The SECURE Act also got rid of the stretch IRA provision. If the beneficiary to your retirement assets is a non-spouse, the SECURE Act says they will now have a 10-year payout. This may have a big impact on the tax burdens those distributions can cause.

"Whom have you named beyond your spouse as your contingent beneficiaries, how are now some new ways you might want to change that with this new rule?" said Ronstadt.

Other changes: The rule legally allows part time employees, who have three consecutive years of 500 plus hours worked, to participate in retirement benefits. The caveat is that the employer still holds the right to offer those benefits. And Parents can use their 529 college fund account to help a child pay off student debt.

For more information on the secure act and its other impacts, click here.