In an effort to provide Americans with access to retirement savings, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The SECURE Act created profound retirement and tax reforms resulting in myriad implications for American workers. The changes should prompt individuals to reevaluate their Colorado estate plan documents to ensure a happy and secure retirement.
The SECURE Act requires Colorado certain employers to offer their employees a retirement savings plan or enroll their qualifying workers in a state-sponsored retirement account. The Act applies to most employers besides small private and nonprofit entities. Significant changes include 401(k)s, IRAs, and 529 college savings accounts. The ACT offers small Colorado business owners a tax credit for starting a workplace retirement plan. Further, new parents receive a benefit in the form of a penalty-free $5,000 withdrawal from a 401(k) or IRA following the birth or adoption of a child.
One of the most significant changes involves the elimination of the “stretch” option for retirement accounts. Under the Act, the majority of non-spouse beneficiaries must withdraw the balance of any inherited retirement accounts within ten years. Beneficiaries must adjust their withdrawal plans to avoid a drastic increase in their tax bills. Before the change, beneficiaries of inherited retirement accounts could opt to take distributions over their lifetime. The change may result in a change of a beneficiaries tax bracket, thus receiving more minor of the funds in the account than initially planned.