The SECURE Act of 2019 (Setting Every Community Up for Retirement Enhancement) was signed into law on December 20th, 2019. The law provides for almost 40 different provisions related to retirement. Changes were made to rules about Individual Retirement Accounts, 529 College Savings accounts, and Employer Provided Retirement plans.
In this article we’ll cover the important changes you need to know about your Individual Retirement Account (IRA).
- The Required Minimum Distribution age changed from age 70 ½ to age 72. That means you now must begin taking withdrawals from your IRA in the year you turn 72. A slight wrinkle in the law. If you turned 70 ½ by June 30th of 2019, then you are expected to follow the old rule and immediately begin taking your RMDs.
- The stretch IRA as it was known has been eliminated for all but a few. Before the SECURE Act, beneficiaries of your IRA could take distributions based on their own life expectancy, therefore stretching withdrawals over their entire life. Now beneficiaries must withdraw all funds from an inherited IRA within 10 years. Exceptions to the 10-year rule include assets left to a surviving spouse, a minor child, a disabled or chronically ill beneficiary, and beneficiaries who are less than 10 years younger than the original IRA owner.
- Non-rollover contributions after age 70 ½ are now allowed. You may now make contributions, from earned income, to an IRA regardless of age. All other contribution rules still apply.
- Parents can now take a penalty-free withdrawal of up to $5,000 from their IRA within one year of the birth or adoption of a child. The withdrawal applies to each parent for a total of $10,000. There is no 10% early withdrawal penalty and the amount taken can be repaid, but does not need to be.
As we said in an article about the SECURE Act before it was passed, it goes a long way in helping Americans retire, but it falls far short of making for a “secure” retirement! Please give us a call if you have any questions about your IRA.