Money moves: The rule changes that may impact your bank account in 2020
MILWAUKEE -- We're going to see some big changes with our money in 2020. Financial expert, Brad Allen, joins Real Milwaukee with how your finances could be impacted moving forward.
• The SECURE Act will impact anyone with an IRA or 401(k). This is the first major law impacting retirement savers in more than a decade.
• The new law includes dozens of major changes:
o Contributions to your traditional IRA can be made at any age.
o Those who inherit a retirement account, like an IRA, will be required to withdraw the money within 10 years.
o Required minimum distributions, or RMDs, will be required at age 72 instead of age 70 ½.
New Tax Forms
• The W-4 form has a whole new look! This is the form that tells your employer how much money to withhold for federal income taxes.
• The form is divided into five steps, but only step one and step five are required for all employees.
• If you have already submitted a W-4 form prior to 2020, you are not required to fill out a new form.
• IRS released a calculator to help you determine your withholding. You can find it on my website, wealthwisconsin.com.
• Be sure to talk with your tax professional if you have questions.
Standard Deduction Changes
• The standard deduction for the 2020 tax year is changing.
• When you file your taxes in April 2021, these are the numbers you need to know: The standard deduction for individuals has increased to $12,400 and $24,800 for married couples.
• The child tax credit has also increased to $2,000 per qualifying child.
• If you have any changes happening in 2020, like getting married, starting a business or having a baby, you will want to use these updated numbers to estimate your tax liability.
Increased Contribution Limits
• If one of your New Year`s Resolutions is saving more for retirement, you`re in luck!
• You can now save up to $19,500 in your 401(k). If you`re over the age of 50, you have the opportunity to contribute an additional $6,500.
• Try to stretch yourself and save as much as you can to put yourself in the best position for retirement.
Social Security Increase
• Social Security benefits will increase by 1.6% on January 1, which averages out to $24 per month.
• Also, the Full Retirement Age climbs by two months to 66 years and eight months.
• Remember, you can claim Social Security benefits at the age of 62, but you will not receive 100% of your benefit until you hit your full retirement age.
• If you aren`t sure what your full retirement age is, it is based on the year you were born. I have a chart on my website.