The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted Jan. 1, 2020. It brought with it the most significant changes to retirement plans since 2006.
- You can contribute to your IRA longer. You can now contribute to your IRA past the age of 70½, allowing you more time to save.
- The required minimum distribution (RMD) age changed.* The SECURE Act changed the age at which you must start taking RMDs from your retirement account from 70½ to 72. This change gives your account additional time to grow. (Note: The RMD requirement has been waived for 2020, per the CARES Act signed into law on March 27, 2020.)
*Notably, for those born BEFORE July 1, 1949, the previous rules apply. Donors who turned 70½ in 2019 or earlier will have to continue to take required minimum distributions.
- IRA rules changed for most non-spousal beneficiaries. If you name someone other than your spouse as the beneficiary of your IRA, they now have to withdraw the entire amount by the end of 10 years (previously, they could stretch this over their lifetimes). The law takes effect for deaths of IRA owners after Dec. 31, 2019, so IRAs inherited before then still benefit from prior law.
What Stayed the Same
- You can still withdraw funds starting at age 59½ with no penalty. You can still access your retirement savings prior to 59½, but there is a 10% early penalty withdrawal. The new law allows for an aggregate amount of $5,000 to be distributed from a retirement plan without a 10% penalty in the event of a qualified birth or adoption.
- Spouses can still take distributions throughout their lifetimes. When you name your spouse as the beneficiary of your IRA, they can continue to take distributions from the account throughout their lifetime.
- IRA owners age 70½ and older can still make qualified charitable distributions (QCDs) to qualified charities.
Review Your Plans
If you have questions about the impact of the SECURE Act on your retirement plans, be sure to make an appointment with your financial advisor. They can review the plans you have in place (including your beneficiary designations) and help make sure you are still on the right track.