January 10, 2020
The SECURE Act – Two Key Changes Which May Affect Your Retirement Account in 2020 and Beyond
By Clete Albitz, CFP®
The SECURE Act which stands for “Setting Every Community Up for Retirement Enhancement” was signed into law December 20, 2019.
1. Required minimum distributions delayed slightly to age 72: Effective January 1st, 2020 required minimum distributions from retirement accounts will now start at age 72, not 70 ½. If you turn 70 ½ in 2019, you will still need to take your RMD for 2019, no later than April 1, 2020, and if you are currently receiving RMD’s you must continue to take RMD’s. However, individuals turning 70 ½ in 2020 or future years can wait until age 72 to being taking required distributions. Note that qualified charitable distributions (QCD’s) can still be made from IRA’s at age 70 ½ and individuals are eligible to make IRA contributions past age 70 ½ if they have earned income.
2. The loss of the “Stretch” for non-spouse beneficiaries: Previously a non-spouse beneficiary would be able to defer distributions from an inherited retirement account over their life expectancy, potentially deferring taxes over decades. Beginning in 2020, upon the death of the account owner, a non-spouse beneficiary must take distributions that deplete the entire account within 10 years. This can cause a rapid acceleration of taxes due. Minor children who are beneficiaries of IRA accounts have a special exception to the 10-year rule, but only until they reach the age of majority. Also, spouses, disabled individuals, and individuals not more than 10 years younger than account owner are not affected by this change and can continue with either a spousal rollover (for a spouse inheriting a retirement account) or the life expectancy method.
For a comprehensive review of your personal situation, always consult with your legal or tax advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.