November 22, 2020

529 Plan Contribution Limits 2020

529 Plan Contribution Limits 2020 everybody good afternoon I think it is Chris Grandy playing with Chris calm Chris Grandy calm advisors got my weiu shirt on today and my rain spooner pop more the older brands of you know Hawaii, shirts they although our shirts make a nice comfortable t-shirt too I have to say that I wanted today I want to talk about the, the. Secure Act which just passed the house and by the way 402 17 or something and it it's descended to sponsoring the exact same bill with no word changes it's gonna pass so I thought this is gonna apply, to you or your parents so let's let's go. Through these items real quick so what I thought I would, just summarize it for you and I'm using some of the summary from Richard Neil who's a congressman from Massachusetts is the chair of the House Ways and Means Committee at the believes the sponsor the primary, sponsor of this bill and he has a summary of the bill so I'm gonna. Go through that and just talk about some of the points maybe try. To make make them into something more more easy to understand although the summary is pretty good too all right so first thing that is. There's a bunch of sections in this in this bill but their title one first section they, can expand and preserve retirement savings we're going to do is loosen a couple of the requirements on the employer side they're gonna make safe harbor rules easier so safe harbor is, a thing where if you make if a company makes. A contribution to the employees retirement plan a certain percentage like 3% then if. The upper income upper level employee has contributed a lot of money they won't the plan won't be considered top-heavy it'll still be in compliance so as long as, the company made a minimum contribution for all employees then there would be fewer or no. Restrictions on upper income higher level employees contributing a lot and what. They did was they just made a little simpler and easier for people to understand so eliminating some notice that's etc they've also made, it easier and expanded the credits when a small company starts a retirement plan so if you are thinking of starting a retirement plan that was. Formerly a they would give you a tax credit for that at one time now they're going to expand and make it, easier don't need to go through all the details but they're just trying to make more incentivize retirement plans across the across the marketplace especially for small companies. That don't have them so they're increasing that they're also giving, a tax credit for those who will automatically enroll employees in automatic enrollment credit so those are. The first four sections we're basically simplifying the 401k process etc making a giving making the tax credits also simpler for putting these, plans in place for your employees so fYI if you happen to run a small company alright next section they're doing is. 105 is there going to allow certain non tuition fellowship and stipend payments to be considered compensation so in other words. You might be a graduate student in your earning some fellowship you've got a. Fellowship or you getting a stipend and it wasn't previously considered earned income. For taxable purposes so you couldn't use that income to contribute to an IRA for the basis of that because in order to what are the contribute to an IRA you have to. Have earned income okay and let's say you're under age 50 and you want to contribute the maximum $6,000 to. An IRA you'd have to have at least six thousand dollars of income so if you, have three thousand dollars of income you can contribute three thousand to an IRA if you had six thousand dollars of income you can contribute six thousand dollars if. You have twenty thousand dollars of income you can contribute six. Thousand so that was the rule but certain people in the university environments were working in places and they. Were not getting the income they're earning was not considered taxable income not IRA income they've they've now gonna treat certain non tuition income as compensation, priori purposes to allow those people to go to each IRA so hey there you go grad students get a little bit of a. Break being paid a very little salary for the work you do but, trying to give you a little bit of tax break repeal. Of maximum age for traditional IRA contributions so in other words once you have each said previously once you hit age 70 or currently until they change this once you hit age 70.

You can no longer contribute to to an IRA they're gonna eliminate. That cap so if you're working and you're 75 you can contribute right there next section they're gonna eliminate the ability for 401k loans to.

Be made through credit cards and other easy-to-use processes so kind of feeds the purpose if if you make it as easy as a, credit card right you've got a hundred thousand the 401k I need to borrow, from it for whatever reason you know.

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