SECURE ACT: RMD & Other Important Changes You Need to Know

From the Desk of Ali A. Criss, CFP 

Happy 2020! I hope you are enjoying the start to a brand-new decade. On top of the changes I’m sure you’ve committed to both personal & professional growth… there are sizable changes coming to your retirement savings! 

The SECURE Act “Setting Every Community Up for Retirement Enhancement” was signed into law by President Trump on December 20th, 2019 and hit the ground running taking effect January 1, 2020.  The goal of this new law is to strengthen the savings potential and retirement security for those living in the United States.

Key Changes Impacting You

  • Required Minimum Distributions
    • Required Minimum Distributions (RMDs) are now delayed until age 72 for those born July 1, 1949 or later
    • Those currently taking RMDs, or those that are born prior to this date, will still need to draw their annual RMD at age 70 ½
  • IRA (Individual Retirement Account) Contributions
    • The age maximum for contributions has been removed. Prior to the SECURE Act, you could not make IRA contributions after age 70 ½
    • You can still convert your Traditional IRA to a Roth IRA with no age limit
  • Beneficiary IRAs (Non-Spouse) / Stretch IRAs
    • A huge change coming is for those inheriting IRAs. Beneficiaries will no longer be able to take annual RMDs based on their own life expectancy (no more stretch IRAs).
    • For owners who pass away on or after January 1, 2020, beneficiaries are now required to take out all funds within 10 years of inheriting. No RMDs will be required. This could present a tax burden, especially for those in their highest earning years.
    • Exceptions to this are surviving spouses, minor children, disabled or chronically ill beneficiary or those who are less than 10 years younger than the original owner.
    • If a trust is named as an IRA beneficiary, it will be wise to re-consult with your estate planning attorney & financial advisor ASAP on how this will pan out with the new law. Changes may need to be made.
  • Employer tax credit
    • Employers will receive a tax credit for auto enrolling employees into a retirement plan (401k or Simple IRA etc.)
    • This credit is to offset start up costs of a new plan
  • Parents/ 529 plans
    • Allows new parents to withdraw up to $5,000 penalty free from a retirement account (401k or IRA) within in a year of birth or adoption for qualified expenses
    • Allows parents to withdraw up to $10,000 from 529 plans to repay student loans!!

This was a brief summary of the main changes impacting your retirement savings. For more information & education, please feel free to reach out to me.

Have a happy & healthy 2020!

Ali