On December 20, 2019, President Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Most provisions in the law went into effect on January 1, 2020.
This important retirement legislation reflects policy changes to defined contribution plans (such as 401(k)s, defined benefit pension plans, and individual retirement accounts (IRAs). Below are three key provisions from the Act that are likely to be the most relevant to your clients:
Repeals the maximum age for traditional IRA contributions, which is currently 70½. Prior to the Secure Act, you could not make payments into a traditional IRA if you were 70 ½ years or older. This is no longer the case. As of the new law, anyone above age 70 ½ can also contribute as normal into their traditional IRAs if they wish.
Increases the required minimum distribution (RMD) age for retirement accounts to 72 (up from 70½). Prior to the SECURE Act, an IRA owner had Required Minimum Distributions (RMD) at age 70 ½. RMD is the minimum amount of money that must be withdrawn from a retirement account by owners and qualified plan participants of retirement age. The new SECURE act increases the age after which you must start taking RMDs from 70 to 72.
Stricter rules for post-death required minimum distributions curtail ‘Stretch IRAs’: The SECURE act requires that most non-spouse IRA beneficiaries “drain” inherited accounts within 10 years of the account owner’s death. However, there are exceptions to the new 10-year rule. Surviving spouses can still withdraw just the required minimum over their life expectancy, as can minor children and people with disabilities.