The Setting Every Community Up for Retirement Enhancement Act, better known as the SECURE Act, was signed into law on Friday, December 20. There are a lot of changes to the tax laws but I just want to point out the major updates that will affect your IRA and other retirement accounts.
Required Minimum Distributions (RMDs) Will Start at Age 72, not 70½
Starting January 1, 2020, you will need to start withdrawing money from your traditional IRA at age 72, a change from the current withdrawal requirement of age 70½.
If you turn 70½ in 2019, you will still need to take your RMD for 2019 no later than April 1, 2020. If you are currently receiving RMDs (or should be) because you are over age 70½, you must continue taking these RMDs. Only those who will turn 70½ in 2020 or later may wait until age 72 to begin taking required distributions.
You Can Now Contribute to Your Traditional IRA After Age 70½
Beginning in the 2020 tax year, the new law will allow you to contribute to your traditional IRA in the year you turn 70½ and beyond, provided you have earned income. You still may not make 2019 (prior year) traditional IRA contributions if you are over 70 ½.
Inherited Retirement Accounts
Upon death of the 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 the 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.
Adoption/Birth Expenses
The new law allows penalty-free withdrawals from retirement plans for birth or adoption expenses, up to certain limits.
Please let me know if you have any questions and Happy New Year!
.Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
