Recent Tax Law Changes that Affect Your 401(k)/IRA
In December 2019, Congress passed a law called the SECURE Act which stands for the Setting Every Community Up for Retirement Enhancement Act of 2019. Don’t you love the hyperbole.
First, let me tell you what this law does and then we can talk about how it impacts you. For the clients that we work with in terms of tax reduction strategies for retirement accounts, here are the important bullet points:
- Repeals the maximum age for traditional IRA contributions which is currently 70.5 which means you can put more money into your IRA as long as you are working after the age of 70.5
- Increases required minimum distribution age for retirement accounts up to 72 (up from 70.5)
- Allows long-term, part-time workers to participate in 401(k) plans
- Offers more options for life-time income strategies inside retirement plans
How can this help you save taxes? Under this act, you can continue to contribute to your IRA past age 70 as long as you’re still working but it also means that you can continue to make a Roth IRA conversion strategy or stretch out for two more years until the age of 72 without troublesome RMDs. This will allow you to get more money from a tax-deferred account to a tax-free account.
For more information on tax-free accounts and what strategy is best for you, go to www.coastaltaxcenters.com.