Yearly Archives: 2020

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CARES Act Commentary – April 13, 2020

Goddard Financial Planning remains “open for business” albeit in new configurations with the team working remotely. We are busily working with clients who need help navigating the current landscape. Note that currently e mail is our preferred means of communication. While we strive to respond to client inquiries within 24 hours, that is not always possible based on our workloads. We appreciate your patience and understanding in this unique time.

We wanted to communicate with clients about the recent Coronavirus Aid Relief and Economic Recovery Act (CARES), which was passed into law on March 27, 2020. While the changes cover a broad array of topics, here are several items we think could have the largest impact on our clients:

Required Minimum Distributions (RMDs) Waived for 2020

We expect this provision to impact a significant number of clients. 2020 RMDs are waived for IRAs and most 401(k)/403(b)/457 plans. This also applies to Inherited IRA RMDs. If you have already taken your 2020 RMD from an employer-provided plan, it may be possible to roll back the distribution if you don’t need the money. This roll back feature does not apply to an inherited IRA Required Minimum Distribution.

Small Business Owners may be eligible for loans through the Paycheck Protection Program

If you qualify as a small business owner, you may be eligible for various programs including the Paycheck Protection Program. A business is eligible if it has less than 500 employees and it can also include independent contractors and sole proprietors. The maximum loan amount is 2.5 times your average monthly payroll costs for the previous year. If you are interested in learning more, visit the Small Business Association website or inquire with your current bank. This provision is time-sensitive, and we encourage you to apply as soon as possible.

Stimulus payments

Stimulus payments will be coming to some of our clients and are based on the adjusted gross income on your most recent tax return. Payments of $1,200 (single/head of household filers) and $2,400 (joint filers) will be sent to eligible taxpayers. An additional $500 payment is made for each dependent child. Payments begin decreasing if the AGI on your tax return exceeded $75,000 (single), $112,500 (HOH), or $150,000 (joint). The payments will be sent automatically, so if you are eligible, there is nothing you need to do in order to receive the payment.

Some retirement plan distributions for COVID-19 related reasons are not subject to penalty

Distributions from qualified retirement plans (such as IRAs, 401(k)s, 403(b)s and 457s) received during 2020 of up to $100,000 for COVID-19 related purposes are allowed without a 10% penalty for pre-59 ½ distributions. These distributions will be taxed evenly over 3 years beginning with year of distribution and may be recontributed within 3 years. Related purposes include a COVID-19 diagnosis for you, your spouse or dependent, and financial hardship as a result of business closures, reduced work hours, lay off, furlough, lack of childcare or other factors as determined by the Treasury.

y to evaluate whether any of these changes might impact your plans immediately or as part of your next Annual Review meeting. Consider the information in this newsletter to be an initial interpretation of the CARES law and not personalized advice.

If you have any questions or would like to set up a meeting, please reach out to info@goddardfinancialplanning.com.

CARES Act Commentary – April 13, 20202020-04-14T23:15:44+00:00

SECURE Act Commentary – January 29, 2020

While most of the country was enjoying the holidays in late December, Congress was busy putting the final touches on the Setting Every Community Up for Retirement Enhancement Act, better known by its acronym of the SECURE Act. After being signed into law, the new provisions went into effect January 1st , 2020, marking the most notable changes to retirement accounts in several years. While the changes cover a broad array of topics, here are three items we think could impact the highest number of our clients:

Required Minimum Distribution (RMD) Age Increasing From 70 ½ to 72

It all comes down to one important date: June 30, 1949

If you were born on or before June 30, 1949, the RMD start age is still 70 ½. If this applies to your situation, it is likely you have already taken your first RMD.

If you were born after June 30, 1949, the age at which you must take your first RMD from a retirement account is now 72.

For our retired clients who haven’t reached RMD age yet, this change could extend the window for performing partial Roth IRA conversions or harvesting long-term capital gains while in a lower income tax bracket, or it could simply extend the period of tax-deferred growth for your retirement assets by another 18 months.

For those clients who make direct charitable contributions from an IRA, the minimum allowable age for making Qualified Charitable Distributions from an IRA remains age 70 ½, even though the age at which you must begin RMDs may increase to age 72.

Non-Spouse Inherited IRA Distribution Rule Changes

For those who might pass away on or after January 1, 2020 with non-spouse beneficiaries (i.e. children who inherit from a deceased parent), there are new Inherited IRA distribution rules. While there will no longer be annual RMDs, the new rules will require the Inherited IRA to be fully distributed by the end of the 10th year. This has the potential to cause unexpected tax consequences for a beneficiary in prime working years who might inherit a sizable IRA from a deceased parent.

Please note that for non-spouse beneficiaries who inherited IRAs prior to January 1, 2020, there is NO change to your previous distribution schedule (which allowed clients to “stretch” distributions using annual RMDs over their own life expectancy).

Age Limitation Removed for Traditional IRA Contributions

For clients over age 70 ½ and still working, the maximum age limit on Traditional IRA contributions has now been removed. Previously the limit was age 70 ½ for making Traditional IRA contributions.

We’re happy to evaluate whether any of these changes might impact your plan as part of your next Annual Review meeting.

SECURE Act Commentary – January 29, 20202020-04-14T23:15:53+00:00