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Taking Advantage of the SECURE Act

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which became law at the beginning of 2020, has the potential to enhance your financial well-being in a variety of areas. Here are a few ways for you to take advantage of the new rules:

EXPANDING IRA CONTRIBUTIONS The SECURE Act removes the age cap on making a contribution to a traditional IRA, which previously started the year you turn 70½. Under the new rules, as long as you have earned income, you can make a contribution to a traditional IRA at any age. The law has also raised the required beginning date for taking required minimum distributions from a traditional IRA from age 70½ to 72.

NEW FLEXIBILITY FOR 529s As much as $10,000 can now be used for any siblings of a 529 plan's initial beneficiary. In addition, you can use up to $10,000 in 529 Plan assets to pay down student debt during the beneficiary's lifetime.

BONUS FOR NEW PARENTS You can now withdraw up to $5,000 from an IRA for childbirth or adoption expenses, without penalties for early withdrawal. If the distribution is taken from a qualified plan, it is exempt from the mandatory 20% withholding requirement.

LOSING THE STRETCH IRA In the past, non-spouse beneficiaries of an inherited IRA could stretch the required minimum distributions out over their life expectancy, providing significant tax advantages. The new law mandates that most beneficiaries must fully withdraw the balance of an inherited IRA within ten years of the IRA owner's death.

To learn more about how to make use of any of these strategies, contact your Baird Financial Advisor.

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