Congress has passed several significant changes to the law regarding retirement accounts. The bill, known as the SECURE Act, includes new laws that could have an impact on your accounts, and it is important to understand how these changes can alter your retirement plans or estate planning strategies.
Change to RMD Age: One of the most impactful changes is the increase in age from 70 ½ to 72 for when an individual must begin taking their required minimum distribution (RMD) from their retirement accounts. For anyone that turned 70 ½ prior to December 31, 2019, the law does not apply and you will proceed with taking your RMD as planned. However, for anyone that is turning 70 ½ on or after January 1, 2020, they will not need to start taking RMDs until after attaining age 72.
Stretch IRA/ Inherited Retirement Accounts: Under the old law, assets from an inherited retirement accounts (often referred to as “Stretch IRAs”) could be distributed over the beneficiary’s lifetime. However, now the law requires those assets to be distributed within 10 years. For anyone that inherited an IRA from an original IRA owner who passed away prior to January 1, 2020, no changes to your distribution schedule are required. Exceptions to the new 10 year distribution requirement include assets left to a surviving spouse, a minor child*, a disabled or chronically ill individual, and beneficiaries who are less than 10 years younger than the decedent.
Contributions to Traditional IRA: The law previously prohibited individuals from making a contribution to a Traditional IRA after the age of 70 ½ regardless of employment status. Now, individuals of any age may make a contribution to their Traditional IRA, as long as they are employed.
Please be advised that the SECURE Act includes other provisions not highlighted here. The above focuses solely on the changes to the law that may impact your account(s). Please review the SECURE Act in its entirety should you wish to learn more.
Adams-Moore, LLC cannot provide legal or tax advice. The information contained herein is general and educational in nature and should not be considered legal or tax advice. Adams-Moore, LLC makes no warranties with regard to such information, and disclaims any liability arising out of its use. For more information regarding these new laws and their impact on your retirement accounts, please consult with a tax advisor or attorney.