Information Regarding the SECURE Act – Effective January 1, 2020
On December 20, 2019, the President of the United States signed into law the SECURE (“Setting Every Community Up for Retirement Enhancement”) Act, which took effect on January 1, 2020. The Act makes significant changes to IRA, 401(k), and other qualified retirement accounts and will have a direct impact on how individuals manage their retirement accounts going forward. To determine the actual impact of this new law, individuals with retirement accounts should conduct an immediate review of beneficiary designations and estate plans with their tax and legal advisors.
A Glance into the SECURE Act – Key Impacts:
- Age requirement for account owners to take their first RMD (“Required Minimum Distribution”) increased from 70 ½ to 72. NOTE: This applies only to individuals who reached age 70 ½ after December 31, 2019. If you reached age 70 ½ in 2019, you must take your first RMD no later than April 1, 2020.
- Effective January 1, 2020: if you have earned wages/compensation you may contribute to your Traditional IRA, regardless of age.
- For accounts where owner’s date of death is after December 31, 2019, most non-spousal designated beneficiaries must withdraw the entire inherited IRA within 10 years. NOTE: If you are a beneficiary that qualifies as disabled or chronically ill, or you are less than 10 years younger than the account owner, or you are a minor child of the IRA owner, the 10-year payout requirement does not apply. This requirement does apply to grandchildren. If the beneficiary listed on your account is a trust, either a 5- or 10-year payout requirement may apply depending on the terms of the trust.
The SECURE Act is the first piece of legislation aimed at retirement planning in nearly two decades and will impact every individual owner and beneficiary of a retirement account. Please consult with your tax-professional or attorney on how these new laws could impact your financial journey.