The SECURE Act and you

The SECURE Act and you How the SECURE ACT impacts your IRAs and 529 plans What is the SECURE Act? How the SECURE Act affects you Americans are working and living longer, The SECURE Act is over 20,000 words long yet many are still not prepared for retirement. and includes many provisions that won’t impact On January 1, 2020, the Setting Every you. However, it’s important to be aware of Community up for Retirement Enhancement changes that affect your IRAs and 529 plans. Act of 2019 (SECURE Act) went into effect. This bill makes some important changes to various rules on saving for retirement and helps make it easier for people to save more, for longer. 196046

What you need If you’re under age 59½ to know about the SECURE Act If you’re under age 59½ and make a withdrawal from an IRA, and your IRAs you must pay a 10% penalty for the amount withdrawn. Under old law, there were a few exceptions to this rule. The SECURE Act adds a new exception to early withdrawal rules for traditional and Roth IRAs. Additionally, the amount paid to graduate and post-doctoral students is now treated as compensation for purposes of making IRA contributions. Under old law, students receiving stipends weren’t allowed to contribute. If you’re approaching age 70½ Required minimum distributions (RMDs) are amounts you must withdraw annually from your traditional IRAs. Under old law, RMDs began at age 70½. The SECURE Act raises the age to 72. This means you can take advantage of an additional 18 months of IRA tax advantages. New parents If you’re over age 70½ may now withdraw Under old law, contributions to a traditional IRA were up to $5,000 for prohibited once a person reached the year they turned 70½. the birth or adoption Now under the SECURE Act, anyone, even those older than 70½, can contribute to their IRA, as long as they continue to work. If of a child, without you’re working into your seventies, talk to your financial advisor paying the early to decide if continuing to contribute to your IRA makes good financial sense. withdrawal penalty.

If you’re planning to bequeath or inherit an IRA One of the biggest SECURE Act changes eliminates the IRA “stretch” provisions. Under old law, beneficiaries could take distributions from their inherited IRAs based on their life expectancy, allowing them to “stretch out” the value of the IRA for a longer period of time. The SECURE Act updates this law, requiring nonspouse beneficiaries to withdraw all assets of an inherited account within 10 years, at which point the beneficiary must pay taxes on that money. This means all the money in the IRA must be withdrawn by the end of the 10th year following the year of inheritance. The 10-year rule does not apply to spouses, disabled and chronically ill beneficiaries, and minors. For minors, the exception lasts until the child reaches the age of majority, which is 18 to 21 depending on the state. Once the minor reaches that age, the 10-year rule kicks in. Americans are working longer and will no longer be required to withdraw assets from IRAs and 401(k)s at age 70½. If you plan to bequeath an IRA, or are expecting to inherit one, have a conversation with your financial advisor about your options to help you and your heirs maximize your retirement savings while minimizing your tax burden. What you need to know about the SECURE Act and your 529 plans The SECURE Act will help many Americans deal with the financial burden of student loans. Under the SECURE Act, parents with 529 plans can make a tax-free withdrawal of up to $10,000 to help pay off their child’s student loans. The $10,000 limit is per person, not per plan, which means withdrawals can be made to pay the student debt of a 529 plan beneficiary’s siblings.

Next steps to take The SECURE Act will help approximately one quarter of working Americans to save money, take responsibility for their own retirement future, protect those assets and minimize taxation. Updates to the law may require you to revisit your IRA contribution and withdrawal strategies, or change your estate planning strategy. If you have questions or concerns, your Bankers Life financial advisor is here to help! Bankers Life Securities, Inc., Bankers Life Advisory Services, Inc., and their representatives do not provide legal or tax advice. Each individual should seek specific advice from their own tax or legal advisors. Bankers Life is the marketing brand of various affiliated companies of CNO Financial Group including, Bankers Life and Casualty Company, Bankers Life Securities, Inc., and Bankers Life Advisory Services, Inc. Non-affiliated insurance products are offered through Bankers Life Securities General Agency, Inc. (dba BL General Insurance Agency, Inc., AK, AL, CA, NV, PA). Securities and variable annuity products and services are offered by Bankers Life Securities, Inc. Member FINRA/SIPC, (dba BL Securities, Inc., IA, MI, PA). Advisory products and services are offered by Bankers Life Advisory Services, Inc. SEC Registered Investment Adviser, (dba BL Advisory Services, Inc, AK, IA, PA). Investments are: Not Guaranteed—Involve Risk—May Lose Value BankersLife.com ©2020 Bankers Life (02/20) 196046 196046