To avert a government shutdown that would have taken place on December 20, 2019, Congress approved a massive government spending bill. Included as part of that bill was the retirement savings bill known as the “Setting Every Community Up for Retirement Enhancement” Act, or simply the “SECURE Act.” As reported by Charles Schwab in December, a few of the key provisions in the retirement savings portion of the bill include:
- Change to RMD age. The law raises the age at which individuals must begin taking RMDs (required minimum distribution) from their retirement accounts to 72 from 70 1/2. Important: The new law only applies to people who turn 70 ½ after December 31, 2019. If a person turned 70 ½ in 2019, the law does not apply.
- Contributions to traditional IRAs after age 70 ½. IRA contributions can continue at any age as long as you have earned income. Currently, one can’t contribute after age 70 ½.
- New rules for inherited retirement accounts. In the past, a non-spouse beneficiary of an IRA or 401(k) could stretch out RMDs from the plan over their own life expectancy. Starting January 1, 2020, if an owner of IRAs and 401(k)s passes away and leaves the accounts to a beneficiary other than their spouse, the beneficiary will only have 10 years after the year of death to distribute the entire retirement account unless the beneficiary is a qualified eligible beneficiary as defined in the SECURE Act.
- Penalty-free withdrawals for birth/adoption expenses. New parents can withdraw up to $5,000 from an IRA or an employer-sponsored retirement plan to pay for birth and/or adoption expenses. The withdrawal will be taxed but no early penalty applies.
These are just a handful of the changes being implemented via the SECURE Act. As always, our mission is to foster a sense of financial well-being for our clients.
What You Should Do Next:
- Contact us with any questions or concerns about the SECURE Act or retirement planning.
- Read our retirement case study in our Wealth Transitions section.
- Click here to learn more about the ClearRock approach and process.
- Speak with one of our Senior Advisors.
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