The Secure Act, part 1 Uncommon Cents with Bowman Financial Strategies

Erik (00:06):
You're listening to uncommon sense, a podcast by Bowman Financial Strategies. I'm your host, Erik Bowman and thank you for joining me today. Hi everyone. This is Erik Bowman, your host and it's January 22nd, 2020.
Erik (00:27):
One of the highest priorities we have is providing our clients accurate information to allow them to make informed decisions relating to their retirement income. Taxation is probably the biggest expense retirees will face in retirement and bringing actionable information to make confident decisions is a core philosophy of the Bowman Financial Strategies LiveWell Formula. The LiveWell Formula is our process of analyzing our client's current situation, managing their financial investments, coordinating their distributions from various accounts with the goal to minimize taxes and increase net income. It also includes detailed social security, filing, timing and pension planning. Recommendations for some estate planning and legacy planning are a part of the plan. In this episode, I am going to cover some of the highlights of the Secure Act approved by the Senate on December 19th, 2019. The Secure Act addresses many issues relating to retirement savings and distribution. Like everything in this world though there is some good news and some bad news in this new legislation. My goal is to provide you an education of the main components of the law and understand how it may impact you personally and additionally, we want to address how this new law may require changes to our retirement plan to both take advantage of the new provisions and to minimize the pain associated with others.
Erik (01:57):
The setting every community up for retirement enhancement act of 2019, better known as the Secure Act, which originally passed the house in May of 2019, was approved by the Senate on December 19th, 2019 and signed into law by the president on December 20th of 2019. The bill includes significant provisions aimed at increasing access to tax advantaged accounts and preventing older Americans from outliving their assets. There are a few key provisions regarding required minimum distributions and inherited IRAs that should be considered.
Erik (02:39):
In addition to the inherited IRA and required minimum distribution provisions, there are other aspects of the Secure Act. First, IRA contributions can now be made after the age of 70 and a half as long as you're still working. Employees can contribute to their own or their spouse's IRA after they've reached the age of 70 and a half. Long term part time workers are now able to join their company's 401k plan. Employees that work over a thousand hours in one year or over 500 hours in three consecutive years are now able to participate in their employer's 401k. Small business employers, of a hundred employees or less, will receive a maximum tax credit of $5,000. That's $250 per non highly compensated employee. When they establish a retirement plan, account owners are able to withdraw up to $5,000 penalty free from their retirement plan upon the birth or adoption of a child. This will be free from the 10% early withdrawal penalty, but will still be subject to ordinary income tax. Further, 529 Plans can be used to pay down student loan debt and small business owners can now more easily establish Multiple Employer Plans, or MEPs, by allowing unrelated employers to join together in the creation of a plan. The employers no longer have to be related by common ownership or by being in the same industry among other options.
Erik (04:05):
But for today we're going to really focus in on the required minimum distribution aspect and then our next podcast we are going to focus in on the inherited IRA changes. Today I'm going to focus on the required minimum distribution changes. They are pretty exciting and I think that most retirees would look at this as a benefit. I am going to talk about the pros and cons of this change, however. So the age for required minimum dist