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Robert L. Davis, CPA
Financial Advisor
Crystal D. Davis, CFP®
Financial Advisor
Davis Financial Services, LLC
Park Place Professional Center
5871 Allentown Road
Camp Springs, MD 20746
Phone: 301-702-9300
Website: www.davisfinancialsvcs.com
The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which went into effect this year, created significant changes to retirement savings rules. From later required minimum distributions (RMDs) from IRAs and 401(k)s to accelerated distributions of inherited IRAs, the SECURE Act affects nearly everyone.
One exception is you don’t have to take RMDs from an employer’s retirement plan until you stop working, unless you own at least 5% of the company. You can also contribute to an IRA past your RMD date as long as you have work income to offset the contribution. Previously, you had to stop contributing by age 70 1/2, even if you continued to work.
More workers can contribute to 401(k) plans, too, starting in 2021. Part-time employees who worked at least 500 hours in each of three straight years (and reached age 21 by the end of the period) are eligible to contribute. And 401(k) plan participants should expect new disclosures estimating their lifetime income from their plans, while they may possibly see annuities as new plan options.
The SECURE Act added some other wrinkles, allowing up to $5,000 in penalty-free distributions from IRAs and certain other plans, if amended, within a year of a qualified birth or adoption and up to $10,000 from a 529 plan to pay for student loans.
*The CARES Act suspends the RMD requirement for 2020. Employer sponsored retirement plans may permit through plan amendment.
**Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 1/2, may be subject to an additional 10% IRS tax penalty.
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Davis Financial Services LLC and LTM Marketing Specialists LLC are unrelated companies. This publication was prepared for the publication’s provider by LTM Client Marketing, an unrelated third party. Articles are not written or produced by the named representative.
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