Understanding The SECURE Act, Part 2

The SECURE Act will bring several changes that may impact your retirement planning, and Nathan will go over four more of those provisions. This concludes our two-part series on the SECURE Act 2019.

Full show notes: https://thefinancialanswer.com/podcasts/understanding-the-secure-act-part-2/

Confidence Corner

1:50 SECURE Act 2019 (continued)

• This is part two talking about the SECURE Act, so go back to the previous podcast for part one.
• First major retirement legislation since 2006. 29 new provisions, but we will talk about eight. This is not yet finalized and the Senate has a similar bill.

4:26 Tax credits for automatic enrollment

• This will be an incentive for small companies to automatically enroll employees into a retirement plan. Employees will have the option to opt-out. The credit will go to the business owner to help offset the cost of setting up the plan.
• So many Americans are employed through small businesses, so hopefully this will help more people to start saving.

8:34 Penalty-free distributions for the birth or adoption of a child

• Under the Act, you could take out $5,000 from your retirement following the birth or adoption of a child.
• This allows you to avoid the 10% penalty, but you still pay the taxes.

10:48 Lifetime income disclosure for defined contribution plans

• A 401(k) plan is an example of a defined contribution plan. This rule would require employers to send a notice every year showing the expected growth of your money and your estimated monthly income in retirement.
• Nathan says it sounds like it will be a state-run plan under the proposed rules.

14:29 Removal of stretch IRA provisions

• Nathan loves stretch IRAs and feels this is the worst item in the SECURE Act because it eliminates a fantastic retirement building tool.
• This makes an inherited IRA have to be paid out, and therefore taxed, over a ten-year period. In the Senate, they are discussing setting a limit for this, which will have an impact on Roth conversions. Typically, Nathan recommends Roth conversions once an account hits $700,000, but if this is passed in the Senate with a limit then he will be forced to have that conversation with clients much sooner.