What does the SECURE Act Mean for your retirement savings?

Derek Bostian, CFP® Derek Bostian, CFP®

The Setting Every Community Up for Retirement Enhancement Act better known as the SECURE Act was signed into law on Friday before Christmas. This is a major, sweeping reform bill that was added at the 11th hour and will include new rules for retirees that may affect decisions for many of you when it comes to your Required Minimum Distributions (RMD’s), contributions to retirement accounts, and inheritance options for beneficiaries. If you have any questions about the bill or see anything that concerns you as you read and hear about it from the media, please let us know.

Top 4 Things to Know for Individuals

  1. RMDs Will Start at age Age 72 now – not age 70 1/2.Starting Jan. 1, 2020, the new law pushes the age at which you need to start withdrawing money from your traditional IRA retirement accounts to age 72 from age 70 ½. If you turn 70 ½ in 2019, you will still need to take your RMD for 2019, no later than April 1 of 2020. If you are currently receiving RMD’s (or should be) because you are over age 70 ½, you must continue to take RMD’s. Only those who turn 70 ½ in 2020 (or later), may wait until age 72 to being taking required distributions. This could potentially lengthen the window for strategic planning around taxes and legacy intentions.
  2. You Can Contribute to Your Traditional IRA After Age 70 ½Beginning in your 2020 tax year, the SECURE Act will allow you to contribute to your traditional IRA in the year you turn 70 ½ and beyond, provided you have earned income. You still may not make 2019 (prior year) traditional IRA contributions if you are over 70 ½.
  3. Inherited Retirement AccountsUpon death of a retirement account owner, distributions to individual beneficiaries must be made within 10 years. There are exceptions for spouses, disabled individuals, and individuals not more than 10 years younger than account owner. Minor children who are beneficiaries of IRA accounts also have a special exception to the 10 year rule, but only until they reach the age of majority.
  4. Adoption/Birth expenses
    The rule allows penalty-free withdrawals from retirement plans for birth or adoption expenses up to certain limits

There are additional provisions within the bill that deal with trusts, reinstating the “kiddie Tax,” Qualified Charitable Distributions (QCDs), annuity’s inside of retirement plans, and multiple rules that affect small businesses. As the bill is further directed and we identify planning opportunities we’ll keep you informed of them.  As always, please let us know any changes in your life that could affect your finances or financial plan.

 

While tax and legal issues may be discussed in the general course of financial and investment planning Advisory Alpha does not provide tax or legal advice. Please consult with your tax or legal professional prior to making decisions relative to these issues.

Derek Bostian, CFP®