Understanding The SECURE Act, Part 2

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The SECURE Act will bring several changes that may impact your retirement planning, and Nathan will go over four more of those provisions. This concludes our two-part series on the SECURE Act 2019.

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Confidence Corner

[1:50] SECURE Act 2019 (continued)

  • This is part two talking about the SECURE Act, so go back to the previous podcast for part one.
  • First major retirement legislation since 2006. 29 new provisions, but we will talk about eight. This is not yet finalized and the Senate has a similar bill.

[4:26] Tax credits for automatic enrollment

  • This will be an incentive for small companies to automatically enroll employees into a retirement plan. Employees will have the option to opt-out. The credit will go to the business owner to help offset the cost of setting up the plan.
  • So many Americans are employed through small businesses, so hopefully this will help more people to start saving.

[8:34] Penalty-free distributions for the birth or adoption of a child

  • Under the Act, you could take out $5,000 from your retirement following the birth or adoption of a child.
  • This allows you to avoid the 10% penalty, but you still pay the taxes.

[10:48] Lifetime income disclosure for defined contribution plans

  • A 401(k) plan is an example of a defined contribution plan. This rule would require employers to send a notice every year showing the expected growth of your money and your estimated monthly income in retirement.
  • Nathan says it sounds like it will be a state-run plan under the proposed rules.

[14:29] Removal of stretch IRA provisions

  • Nathan loves stretch IRAs and feels this is the worst item in the SECURE Act because it eliminates a fantastic retirement building tool.
  • This makes an inherited IRA have to be paid out, and therefore taxed, over a ten-year period. In the Senate, they are discussing setting a limit for this, which will have an impact on Roth conversions. Typically, Nathan recommends Roth conversions once an account hits $700,000, but if this is passed in the Senate with a limit then he will be forced to have that conversation with clients much sooner.

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