The SECURE 2.0 Act addresses long-term care insurance. What do I need to know about it? Robert 'Bob' Powell answers this question as part of Decoding Retirement's special segment, Ask Bob.

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Question:

The Secure 2.0 legislation has a number of provisions, one of which addresses something I’m interested in buying – long-term care insurance. What do I need to know about it?

Answer:

Richard Kaplan at the University of Illinois College of Law recently helped me answer this reader’s question. The big change is this: Retirement plan distributions used to pay for long-term care insurance are exempt from the 10% penalty that applies to “early” distributions, i.e., distributions prior to attaining age 59?. People over 59 ? could already take out money without penalties, so it’s a bit of a curious provision, according to Kaplan.

While this penalty relief is certainly worth something, the distributions used to pay for long-term care insurance remain subject to federal income tax and possibly to state income tax as well, depending on the tax laws of the individual states.

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Editor's note: This post was written by Zach Faulds.