There are a couple of bills that are before each of the two houses that could have small but meaningful impact on personal finances and retirement planning. While they are similar, let’s focus on the bill before the House of Representatives called the SECURE Act.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was unanimously passed by the House Ways and Means Committee and is on the fast track to be voted on by the full house soon. It is reported that the bill has general bi-partisan support, and early indications are that the president would sign it if and when it reaches his desk.
So what’s in it, and why should you care? The bill proposes (among other items):
- Removal of maximum age limit to make IRA contributions. Currently once you reach age 70½, IRA contributions are no longer allowed. While earned income would remain a requirement, for those that will continue to work and earn an income past this age, this would be a welcome change.
- The Required Minimum Distribution (RMD) start age pushed out to age 72. This would be a positive change for those who would be required to take more in distributions from their IRAs than are needed to meet their lifestyle needs.
- Non-spouse beneficiaries of IRAs (except for minor children) would be required to withdraw all of the IRA balance within 10 years. This would eliminate the ability for a non-spouse to stretch the required distributions over their life expectancy, thereby spreading any tax liability out over a longer period of time.
- Penalty-free withdrawal from an IRA or 401(k) of up to $5,000 for qualified birth and/or adoption expenses.
- Ability of 529 plan assets to cover registered apprenticeships, homeschooling, and up to $10,000 of qualified student loan repayments. With the rise in interest in apprenticeships and homeschooling, this would help ease some of those burdens. Student loans are also a hot topic these days. With over $1.5 trillion in outstanding student loan debt, flexibility to use college savings to pay this down will be key.
It goes without saying that bills like this can and will likely change as they make their way through the halls of Congress. We will keep our eyes and ears open and should this become law, we can help you determine how best to handle your personal situation.
Content in this material is for general information only and not intended to provide specific tax, legal, or investment advice or recommendations for any individual. Consult the appropriate advisor prior to making any financial decision. 19-235