SECURE Act 2.0?

Remember when we heard the SECURE Act eliminated the stretch IRA for most all non-spouse beneficiaries?   The SECURE Act said those IRA beneficiaries had to liquidate the IRA by the end of the tenth year.

But, wait!  The IRS in Publication 590-B has issued new guidance that seems to indicate RMDs will be required in EACH of those ten years… no waiting until the end of the tenth year (the government is in debt and needs money, you know).   Eligible beneficiaries – spouses and a few other classes – can still stretch payouts over their life expectancy; but, most non-spouse beneficiaries may have to take RMDs liquidating the inherited IRAs that liquidate the accounts within ten years.

But, wait! (yes, again).  The house Ways and Means Committee unanimously passed H.R. 2954 on May May 5^th.  What’s been called Secure Act 2.0 now goes to the full house before moving on to the Senate and a likely presidential signature.  There are a number of changes, but the top 4 may be these:

1. The RMD age has been increased to 73 starting on January 1, 2022, then to 74 starting on January 1, 2029, and to 75 starting on January 1, 2032.
2. 401(k) and 403(b) plans will be required to automatically enroll workers when they become eligible.  They can opt-out, but the initial enrollment will be automatic.
3. IRA catch-up contributions are currently increased by $1,000 (not indexed) for individuals who’ve reached age 50.  The bill indexes the limits starting in 2023.
4. There will be higher catch-up limits at ae 62, 63, and 64.  The act increases limits on catch-up contributions to $10,000 ($5,000 for SIMPLE PLANS) for individuals who have reached ages 62, 63, and 64, but not age 65.

The dust hasn’t settled yet.

Jim  

Jim Lorenzen

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and an ACCREDITED INVESTMENT FIDUCIARY® serving private clients’ wealth management needs since 1991. Jim is Founding Principal of The Independent Financial Group, a Registered Investment Advisor providing wealth management, retirement planning and investment advisory services. Jim's background includes founding, building, and selling five successful businesses and international consulting. He has been headline speaker at more than 500 national and international association and corporate conventions for clients such as Foster Grant, Hobie Cat, CapCities/ABC, H.R. Textron, Hearst Corporation, The National Management Association, the National Newspaper Association, and Cox Communications and has been featured on American Airlines' Sky Radio heard on more than 19,000 flights, as well as in The Wall Street Journal’s SmartMoney magazine, The Profit Sharing Council of America’s Insights; also published in the Journal of Compensation and Benefits, NASDAQ, and in scores of national and international association trade publications.

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