The SECURE Act was enacted in December of 2019, and it made some changes to the individual retirement account parameters. In 2021, legislation that would make further changes was introduced. It has been making its way through the legislative process since then. According to reports, lawmakers are attempting to approve the measure that is being called SECURE Act 2.0 before the new year.
We are going to explain the changes that would be included in this post. But first, we will provide an overview of the provisions in the Secure Act that have already been enacted.
Traditional individual retirement account holders are compelled to take required minimum distributions (RMDs) when they reach a certain age. Prior to the SECURE Act, it was 70.5, but a provision increased the age to 72.
Account holders could no longer contribute into their accounts after they reached this age, but the SECURE Act changed the playing field. Now, traditional IRA account holders can continue to contribute into their accounts for as long as they are earning income.
There was another change with significant estate planning implications. Non-spouse IRA beneficiaries have to take required minimum distributions. However, in the past they could take only the minimum that was required for as long as possible. This would maximize the tax advantages. Now, the assets have to be removed from an inherited account within 10 years of the time of acquisition.
SECURE Act 2.0
Now we can look at the additional changes that may be right around the corner via SECURE Act 2.0. First, the RMD age will go up to 75 under this measure, but the change would be gradual. Secondly, employers would be required to enroll their employees into company retirement savings plans.
Thirdly, employers would be able to provide 401(k) matches of qualified student loan payments that are paid by employees. Plus, the catch-up contribution for older workers would go up from $6,500 to $10,000. In addition, there would be an expansion of the saver’s credit for lower income workers.
When you are thinking about retirement, you probably envision relaxing times with family members and friends. Many people will travel, and you have time to engage in recreational activities that you enjoy. This is well and good, but you should also consider the twilight years that will follow these golden years.
The majority of senior citizens will receive professional long-term care eventually. Medicare will not pay for the custodial care that nursing homes and in-home caregivers provide. As you might imagine, long-term care is quite expensive. According to Genworth Financial, the median charge for a year in a private room in a nursing home in our area was almost $180,000 in 2021.
Medicaid will cover long-term care if you can gain eligibility. Though it is a need-based program with a low asset limit, it is possible to position your assets wisely with future eligibility in mind. This is an area of specialization for the elder law attorneys at our firm.
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