You hate tax time, I get it.

Figuring out numbers, gathering paperwork, queuing up at tax preparer’s office, or spending a weekend hitting your own head in front of the tax software is a nightmare in each of the step.

A small relief if you have yet contributed to the maximum of the retirement savings. And now is the best time to make small tweaks to make a big difference in retirement down the road.

With the passage of the SECURE Act in late 2019, many tax law changes impact retirement plans. Here are some of the major changes and new ideas to help you take advantage of them.

1. Inherited retirement accounts require more estate planning

Gone are the days of passing your retirement account to a grandchild and having the grandchild withdraw the funds over their longer lifetime. Sometimes these “stretch” rules can result in having 30- plus years to withdraw funds. Stretch rules provided a delayed tax benefit because you don’t have to pay the tax on a lump sum distribution of the entire account.

Beginning in 2020, the MAXIMUM allowed distribution time frame is limited to 10 years for newly- inherited IRAs.

Taking advantage of tax rules.

First, know that the limited stretch rules DO NOT apply to:

• Surviving spouses.

• Minor children, up to age 18 (majority is 19 in 2 states) – but not grandchildren.

• Disabled individuals.

• Chronically ill individuals.

• Individuals not more than 10 years younger than the IRA owner (generally, siblings around the same age).

Second, by properly structuring the beneficiaries on each account you can help provide planning flexibility for your heirs.

Third, if you receive inherited funds, know that you often have a number of distribution options available to you. They include a lump sum distribution, a five-year distribution rule, rollover options, and this new ten year rule. It will require tax planning and knowledge of inherited account rules.

2. More time before you MUST take money out

You now have until age 72 before you are required to make minimum distributions from qualified retirement accounts. This is an increase from the complicated age 70 1/2 rule.

Retirement savings that need to be reported as taxable income when withdrawn can now be left alone, to grow for an additional 18 months. Way before distributions are mandatory and your taxable income increases.

Taking advantage of tax rules:

Now that the age is a simple number, if you are age 70 1/2, you have an extra year and a half to minimize the tax bite on your distributions.

By efficiently planning your withdrawal amounts before age 72, you can often reduce the tax on these funds when withdrawn. So review the minimum distribution requirements of your IRAs, 401(k)s and your other retirement savings accounts carefully. And develop a plan to take advantage of this new rule.

3. Time for a new job?

You can now contribute to a traditional IRA at any age!

While you have always been able to contribute to a Roth IRA at any age, 70½ was the cut-off for making contributions to a traditional IRA.

The only condition to this rule is you must have earned income (wages or self-employment income).

If you are over age 50 you and your spouse can each contribute $7,000 to a traditional or Roth IRA ($6,000 for those under age 50 plus a $1,000 catch up provision).

Taking advantage of tax rules:

Consider getting a part-time job or do some consulting, so you can earn up to $7,000 each year to contribute to your IRA. You can decide if you wish to contribute to either a Roth IRA or a traditional IRA depending on your situation.

4. Other changes worth noting In addition to the above changes, there are also new rules that:

• Allow qualified part-time workers to participate in their employer’s 401(k) retirement savings plans. (Mention to your CEO there is a tax credit for this.)

• Allow new parents to fund up to $5,000 of the cost a birth or adoption out of retirement plan funds – all without early withdrawal penalties!

• Allow employers to automatically pull more of an employee's pay, and put it into the employee’s retirement account.

In conclusion, making tax efficiency in your retirement plan can be complicated. But the rewards are tremendous for those willing to start early, dedicate the time to planning, and ask for assistance.

If you would like to discuss how these changes may apply to you or someone you know please call.