On December 20, 2019, the Setting Every Community Up for Retirement Enhancement Act (The SECURE Act) was signed into law. The Act made several major adjustments to retirement legislation that have been in effect since January 1, 2020. 

So be ready – these changes WILL affect your retirement plan in some way, if they haven’t already. 

Let’s consider 4 ways:

  1. Required Minimum Distributions (RMDs) will start at age 72. 

If you will turn 70.5 at some point in 2020 or later (i.e. born on or after 7/1/1949), you will not need to begin withdrawing money from your traditional Inherited Retirement Accounts (IRAs) or employer tax deferred accounts (401(k)s, 403(b)s, and 457) until age 72. 

However, if you turned 70.5 in 2019 or earlier (i.e. born before 7/1/1949) and have already been taking your RMDs, you must continue taking them as you have. 

  1. “Stretch” IRAs going away for many beneficiaries

When an IRA account owner dies, non-spouse individual beneficiaries have up to 10 years to make distributions. The rules that used to allow a non-spouse IRA beneficiary to stretch RMDs from the account over their own lifetime have been removed. 

There are some exceptions, though, for spouses, disabled persons, and individuals not more than 10 year younger than the account owner, and minor children, but you should check with a financial advisor to see if and how these may apply to your situation. 

  1. Penalty-free withdrawals for adoption or birth expenses

Each parent can now withdraw up to $5,000 to pay for birth or adoption expenses from their separate retirement plan accounts connected to their own names. This means a couple can potentially take up to $10,000 for this new child! 

  1. Contributions to Traditional IRAs allowed after age 70.5

You can contribute to your traditional IRA in the year you turn 70.5 and later, as long as you have an earned income. If you are over 70.5 in 2020, though, you cannot make any prior year contributions.  

Navigating new laws can be tricky, so we recommend that you speak with our resident financial advisor, David Alfano, to devise a retirement plan that will benefit you and your loved ones in years to come. Click here to see how he can help!