The day after Christmas, the President signed the SECURE Act, which focuses on retirement for Americans. The law could potentially raise $15.7 billion to pay for itself by limiting a financial strategy known as a ‘stretch IRA.’ While previously non-spouse beneficiaries could stretch an inherited retirement account over their lifetime, the new law caps the ‘elasticity’ of the tactic by setting a cap of 10 years following the original owner’s death.

Here are a few of the key takeaways from the new law:

-Contributions to retirement accounts will no longer be prohibited after age 70½

-Penalty-free withdraws from varying account types will be allowed for the birth or adoption of a child (up to $5000 from a retirement account) or to pay off student loan debt (up to $10,000 from a 529 account). 

-Required Minimum Distributions (RMD) will now start at 72 years old instead of 70½

-Employers can now offer annuities through sponsored retirement plans.

-Small businesses will have an easier time establishing 401(k) plans.

What does this mean for you?

Typically, the TSP for Federal employees mirrors similar retirement plans for the private sector. For instance, both usually have identical contribution limits. (2020 is $19,500.) The official TSP website posted a very concise message about providing information as the SECURE Act’s details are finalized.

 Expect more from the Blog and Ed Zurndorfer’s FEDZONE as the information becomes available. Several components of the newly passed legislation could significantly impact one’s financial plan. Talk to an advisor about your federal benefits today.

Until Next Time,

**Written by Benjamin Derge, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.

The Secure Act