SECURE Act 2.0?

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Remember when we heard the SECURE Act eliminated the stretch IRA for most all non-spouse beneficiaries?

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 5th.  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  

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Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-based registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

Opinions expressed are those of the author.  The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

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Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-based registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.

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