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How To Save More For Retirement Under New IRA Rules

January 30, 2020

How To Save More For Retirement Under New IRA Rules

IRA Rules

Secure Act

Schedule your free 15-minute retirement strategy call >>>https://bit.ly/2y85PTq

KEY TAKEAWAYS

Guess what! Under the SECURE Act, which was just signed into law in December of 2019, you can now save past the age of 70 1/2 in your IRA for your retirement. It’s a beautiful thing!

In today’s video, I’m talking about what this new rule means for you and retirement strategies to take advantage of it.

Click here to watch the full video or read the full video transcript, below.

The SECURE Act – What’s Changed

The SECURE Act is a bipartisan piece of legislation that was in the works for quite a long time. It’s massive- 1,773 pages long! This document addresses everything from using 529 plan money to repay student loans, all the way to extending the amount of time you can contribute to your IRA accounts.

Prior to 2020, before this act was signed into law, the requirements were this… If you were over 70 1/2, regardless if you were still working or retired, you were capped out. You couldn’t contribute to your IRA account after age 70 1/2. This was challenging for a lot of people because a lot of us are working past the age of 70 1/2 and it would be nice to be able to continue to contribute to retirement accounts.

In the SECURE Act, there’s a provision that addresses this challenge. Starting in 2020, if you are still working and you qualify for IRA or Roth IRA contributions, you can continue to contribute to your IRA accounts.

Retirement Strategy: Work Longer, Save More

There are a couple of planning opportunities here, in terms of your retirement. One is that if you are working longer, even if it’s part time and you qualify for an IRA, you can still put the maximum into an IRA. Let’s say you work until 75, you have several more years where you’re able to save an additional amount of money in your IRA accounts.

Retirement Strategy: Contribute To A Roth

Another planning opportunity is the ability to contribute to a Roth IRA. After you retire, you might go back to work part time and your income could be lower. But you’re still bringing income in and with the cap removed from the IRA, you can continue to save in your IRA accounts.

At this point, you may want to consider saving and putting more money in a Roth instead. With some of the other provisions of the SECURE Act that I talked about in a prior video, the IRA just became a lot less attractive for your beneficiaries who inherit it. A Roth is a good option and even more attractive than it was before, assuming you qualify.

Although you don’t get a tax deduction on the money that goes into the Roth, it does grow tax free from there. Then, when you pull the money out or when your heirs pull that money out, they don’t pay taxes on that money either.

The Rules Have Been Simplified

What is great about this new provision is that it simplifies the rules around the retirement accounts, at least a little. In 401k accounts, you’ve always been able to contribute and continue to make contributions to your 401k, even if you were over age 70 ½ and still working. With the IRA, there was a cap.

The rules weren’t consistent, even though the account types were virtually inseparable in terms of their tax treatment. Now it brings those rules into alignment with each other and it lessens the confusion for everyone. It makes it a lot easier to think through where you might save those monies in the last years of retirement.

Bottom Line

If you’re still working, consider making contributions to your IRA accounts to boost your retirement savings. In addition, consider looking at a Roth. If you have questions regarding these new rules or would like to talk strategy, schedule your free 15-minute retirement strategy call >>>https://bit.ly/2y85PTq

For retirement tips like this, listen to the One Minute Retirement Tip with Ashley >>> https://apple.co/2TgPCHz

THANKS FOR READING!

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Ashley Micciche of True North Retirement Advisors

Disclosure: 

The views outlined in this newsletter are those of True North Retirement Advisors (TNRA) and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for a given client or portfolio.

Investing in stocks includes numerous specific risks including the fluctuation of dividend, loss of entire principal and potential illiquidity of the investment in a declining market. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond and bond mutual fund values and yields will decline as interest rates rise and bonds are subject to availability and change in price.

Any questions regarding the applicability of any specific issue discussed above should be addressed with TNRA. All information, including that used to compile charts and/or tables, is obtained from sources believed to be reliable, but TNRA has not verified its accuracy and does not guarantee its reliability.

Moreover, you should not assume that any discussion or information contained in the newsletter serves as the receipt of, or as a substitute for, personalized investment advice from TNRA or from any other investment professional. To the extent that you have any questions regarding the applicability of any specific issue discussed above to your individual situation, you are encouraged to consult with TNRA or the professional advisor of your choosing. All information, including that used to compile charts, is obtained from sources believed to be reliable, but TNRA has not verified its accuracy and does not guarantee its reliability.

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