Karl Eggerss was interviewed on CBS by Sharon Ko discussing the new SECURE Act. Some of the changes will likely affect your retirement. More financial planning will be necessary to optimize your retirement and minimize taxes.
Sharon Ko: A new law is going to change the rules when it comes to retirement savings. Here’s more on what you need to know about the Setting Every Community Up for Retirement Enhancement Act. What is the SECURE Act and what will be different?
Karl Eggerss: The government’s always looking for ways to try to help people save for retirement, to invest in their retirement, because we don’t have pensions as much anymore, and social security is such a small part of people’s retirement needs. The two main things I think that’ll affect our viewers is that if you have an IRA, an individual retirement account, at 70 and a half, the government makes you take out a portion of it every year based on your life expectancy for the rest of your life. They’re pushing that age back to age 72. The reason that’s beneficial is because if you don’t need that money, you would prefer it grow a couple of more years and you don’t pay taxes on it for a couple more years, so that’s a good part about it. To help fund that, the government’s also going to change the rules for inherited IRAs. So if a viewer has a parent that passed away and they were left their IRA, their parent’s IRA, under the old rules, you could take that money out, a portion of it every year based on your life expectancy.
It didn’t matter if you were 20 years old or 50 years old, they would calculate your life expectancy and you would take out a portion of that money for the rest of your life. They are shrinking that down to 10 years now. So if somebody passes away in 2020 and leaves an IRA to a non spouse, this does not include spouses, a non spouse, that person has to take that money out over a 10-year period at the maximum. It used to be over your lifetime. So those are the two biggest things.
There’s also some things in the SECURE Act that are going to help small businesses with their retirement plans, because it’s been kind of cost prohibitive for smaller businesses to really get retirement plans for five, 10, 20 employees, and they’re trying to make things a little easier for those companies as well. So those are probably the biggest three things that came away from the SECURE Act. So it’ll help some people, it’ll hurt some other people, but generally speaking, it’s all in an effort to help folks save more and to rely more on their savings in retirement. Because again, social security isn’t going to do the trick.