The SECURE Act passes with bipartisan support and has great retirement savings and tax incentives to help hard-working Americans retire with more income and dignity. Eight out of ten millionaires become rich by automatically investing 10 to 20 percent of their pay in company retirement plans. They also automate their savings, investments, and bill payments to stay out of financial difficulty before and after they retire. Unfortunately, about 40% of Americans don’t have access to retirement plans through their employers for many reasons. Well, our legislators are doing something about that to encourage business owners and individuals to invest more for retirement starting in 2020. This new legislation, The SECURE Act, should help more Americans Make It Rain!
Here’s My Take On The Goodies Small Business Owners & Individuals Should Consider Taking Advantage In The SECURE Act
- New small business tax incentives. The new tax incentives are intended to encourage small business owners to set up automatic enrollment (versus opt in) plan features for their employees. This feature is helpful since so many Americans never opt in or forget to opt in to their company plan causing them to miss one of the easiest ways to build wealth and retire with greater income.
- Allows small businesses to join multiple employer plans. Small businesses (owners) can band together and offer retirement plans to their employees while spreading the cost of setting up and operating retirement plans. If your company doesn’t offer a plan ask your owner to consider partnering with other small business owners to offer one. Working together they can lower the overall cost per employee to provide retirement savings, attract new talent by offering a new benefit, and receive tax credits (lower their tax bills).
- Multiple employer plans would be available to part-time workers who have one full year with 1,000 hours worked or three consecutive years of at least 500 hours.
- The required minimum retirement plan distribution age is raised age to 72 giving folks who didn’t turn 70 and ½ in 2019 an extra year and a half before being required to take distributions (receive income) from their retirement accounts.
- Eliminates the IRA maximum age cap for investing money into traditional individual retirement accounts (IRAs).
- Allows penalty free withdrawals of up to $5,000 for the birth or adoption of a child. Provisions were added to the bill allowing people to use some of their retirement funds to help pay family related life events. A few words of caution: Tapping into your retirement funds too often can diminish your ability to accumulate enough wealth to generate the income you desperately need after retiring. Try to avoid taking too many withdrawals to cover the cost of common life events you should plan and save for.
- Annuities can be included in 401(k) plans – Annuities can provide long term guaranteed income but anything great comes with a few potential negatives (possible higher fees/commissions, cancellation restrictions, and income from Annuities may be tax higher than other investment products). If you’re considering Annuities consult a retirement planning or tax professional and don’t rely solely on the advice of an agent selling the annuity product.
- No more stretch IRAs – Tax breaks for beneficiaries is reduced. The beneficiaries of your IRA after death will need to deplete the money in an IRA within 10 years vs. the old option of depleting funds over a longer periods of time. If you’re going to be the beneficiary of someone’s IRA make sure you consult a tax professional to help you plan the distributions and minimize the taxes you’ll pay to the IRS.
As with all posts please do your own research or talk with a professional (tax person, retirement investment adviser, your human resources reps, or other experts) before making changes to your investment plans based on one or two articles. Let’s ensure you make the best choice for yourself and your family as you think about the future.
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