2020 Rules and Changes that Affect Financial Planning
At the end of 2019, we saw major changes in legislation that could impact financial planning and preparation for retirement. These new initiatives include The Social Security 2100 Act, The Secure Act, an increase in 401(K) contribution limits and more that could provide new opportunities for saving for the future, or at least inspire you to adjust your current plans accordingly. Here, wealth planning professional Peter O’Neill of Fiduciam Wealth Planning details new 2020 rules and changes in legislation that could impact financial planning.
Congress Expected to Pass The Social Security 2100 Act
It’s no secret that experts forecast Social Security to dry up in as little as 15 years, and that means your financial planning efforts today may have to differ from the efforts that your parents or grandparents made. That is because many millennial workers today, who make up approximately half of the United States workforce, may not be able to rely on Social Security for retirement—it doesn’t mean the benefits will end, but it is projected that Social Security would only take in enough to cover 80% of benefits in 2035. As a solution, a personal savings investment plan that starts early is one of the best ways to ensure you have a cushion for your retirement. That being said, the new Social Security 2100 Act seeks to ensure that Social Security can exist until at least 2100 through raising the payroll tax gradually to 7.4% in 2043. Congress is expected to pass this bill in order to guarantee the longevity of this economic security system.
The Secure Act Provides a Solution to the Accessibility of Retirement Savings
A recent vote to pass The Secure Act will potentially change the way retirement plans are taxed with a few modifications to pre-existing retirement rules. For instance, some changes that this act brings include access to retirement plans for part-time workers, removing the 70½ age limit for individual retirement account contributions, raising the age for required minimum contributions from 70½ to 72 and other significant alterations. The act also places a limit of 10 years on how long non-spouse beneficiaries can extend an inherited IRA. As of December 2019, this act is officially the most significant change in retirement laws since the Pension Protection Act of 2006.
2020 Sees Higher Contributions Limits to 410(K) Plans
Many working Americans rely on their 401(K) contributions to financially secure their future. Luckily, 401(K) contributors can put as much as $19,500 into their 410(K) in 2020, as contribution limits have increased by $500. It is important to increase as much of your contributions as possible, as your efforts will add up over time. Try to put away as much as 12-15% of your total pay in an effort to be financially comfortable in your later years. Skilled financial planners, such as the financial planning team at Fiduciam Wealth Planning, can help you determine the smartest moves to make when deciding how much to contribute and how it will affect your current and future financial situation.
Discuss These Changes with the Dedicated Financial Planning Team at Fiduciam Wealth Planning
When a wave of legislative changes throws a wrench into your planning efforts, it is important to speak to a financial planner that can help you make tactful decisions regarding your finances and retirement plan. Luckily for you, that’s what we do at Fiduciam Wealth Planning—we work closely with our clients to establish and define the client-planner relationship, evaluate the client’s current financial status and help them make smart decisions that positively impact their financial future. To learn more, contact our Towson office today.