On December 21st, 2019, President Trump signed the Further Consolidated Appropriations Act.  This 1,770 page Act contains 16 separate provisions with the most applicable being Division O, called Setting Every Community Up for Retirement Enhancement Act of 2019, (SECURE Act).  The SECURE Act is focused on expanding and preserving retirement savings.  In addition to this provision, Division Q, called Revenue Provision, added a number of tax extensions on provisions that were set to expire on December 31st, 2019.

Some of the major highlights include:

• Age Increases for the onset of Required Minimum Distributions (RMD) to age 72
  If you turn 70½ on or after January 1, 2020, you will not need to begin taking required minimum distributions until 2022.  Vector will be reaching out to you in the future if this is applicable to you.

• IRA contributions after 70.5 are now permitted 
  You will now be allowed to make IRA contributions after age 70.5 as long as you have earned income.

• Stretch IRA’s will be limited to 10 years 
  This is probably the biggest change to a beneficiary.  Previously, you were allowed to stretch the IRA withdrawals over the beneficiaries’ life expectancy, but moving forward they will only have 10 years to deplete the account. Spouses and a certain few other individuals are excluded from this 10-year rule.

• 529 enhancements 
  529 accounts continue to have a number of perks added to their use, including apprenticeships and student loan repayments.

• “Kiddie Tax” reversion 
  The “kiddie tax” rate will revert back to the pre-Tax Cuts and Jobs Act rates where the excess income will be taxed at the parent’s rate rather than the trust and estate rates.

• Medical expense deduction
  The 10% threshold will revert back to 7.5% through December 31st, 2020.

• Tax Treatment of Mortgage Insurance Premiums (PMI) 
  This has been extended through December 31st, 2020.

Should you have any questions about how these changes may apply to you, please reach out to your advisor.

Additional Resources and Articles

Vector Directory – Contact your advisor if you have any questions about the SECURE ACT of 2019.

Press Release from Ways and Means Committee:
https://waysandmeans.house.gov/media-center/press-releases/ways-means-committee-passes-landmark-retirement-legislation (Summary)

Charles Schwab Article:
https://www.schwab.com/resource-center/insights/content/significant-retirement-savings-law-changes-are-coming-2020?cmp=em-QYD

TD Ameritrade Article:
https://tickertape.tdameritrade.com/retirement/secure-act-retirement-changes-17867

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