Highlights from the 2020 SECURE Act

older-couple-holding-hands-2020-SECURE-Act This year, 2020, is the first time in 15 years that Congress has made significant changes to the rules and regulations surrounding Individual Retirement Accounts, or IRAs, through the SECURE Act. SECURE is short for ‘setting every community up for retirement enhancement’ and as such, the changes contemplated by the act have been made in order to help individuals be better prepared for retirement.   In this video, Joe DiDomenico, Founder of WealthFlex, goes over some of the most important updates from the SECURE Act, starting 2020:

Part-time workers are now eligible for 401(k) plans

Many part-time workers are now eligible to participate in employer retirement plans, where before they were legally locked out by their employers. This change was made in response to there being too many people almost qualifying as ‘full-time employees’ but who were unable to participate in their company-sponsored 401(K) plan because employers were not legally required to allow it.  Now, employees who have either worked 1000 hours during the year or worked for 500 hours over the course of three years are able to participate in their company’s 401(k) plan. This works out to less than 10 hours a week and it is expected that many part-time employees will benefit from this change.  An employer-sponsored retirement plan is one of the first places to look when trying to save for retirement. With the new rules, employers who don’t already have a retirement plan set up have been incentivized to start one as they will receive a tax credit of up to $5,000 for doing so. This is a step designed to empower part-time workers to prepare for retirement.  girl-in-office-part-time-workers-401k1

The age where you are required to start taking distributions has been raised from 70½ to 72

The first of two major age-related changes is that the age where you are required to start taking distributions (known as required minimum distributions or RMDs) from IRAs and 401(k)s has increased from 70½ to 72. 

The limit to making contributions IRAs eliminated

The second major age-related change is that, previously, 401(k)s were the only retirement account you could continue to contribute to past an age cap, but now IRA holders can also do so if they have earned income regardless of age. 

RMDs for inherited IRAs can only be spread over 10 years

There are also changes to rules surrounding inherited IRAs. Starting in 2020, if an IRA is inherited, the new owner can only spread the required minimum distributions over 10 years instead of their lifetime. However, if an IRA is inherited from a spouse or the one who inherits the IRA is chronically ill or disabled, they can still choose to spread it over their lifetime.  retired-couple-on-tablet-age-cap-IRAs

You can take up to $10K from your college savings plan to pay off student debt

Those with student debt can now use funds from their college savings plan to pay it off. Up to $10,000 from a college savings plan can be used to pay back student loans. 

You can take up to $5K from retirement accounts towards child adoption costs

Also, starting in 2020, those who have qualified for child adoption can take up to $5,000 out of their retirement plan without a penalty to pay for any expenses associated with child adoption and care. 

Penalties for employers that don’t file paperwork

Finally, there are now also increased penalties for employers who don’t file their paperwork properly.  These changes are expected to make it easier for everyone to save and invest in their retirement accounts.  Yieldstreet now gives our investors the option to start a Yieldstreet IRA. If you have any additional questions about how to set up and get started with a Yieldstreet IRA, please reach out to [email protected]
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