The SECURE (Setting Every Community Up for Retirement Enhancement) Act became law during the last few weeks of 2019 and became effective on January 1. This measure, which affects anyone who has an IRA, includes the following significant changes:

RMDs will begin at age 72, instead of 70½  — Required minimum distributions (RMDs) must be taken from IRA accounts (excluding Roth IRA accounts) every year once account holders reach a certain age. That age has traditionally been 70½, but now it has been bumped to 72, allowing investors to continue tax-deferred growth longer. If you turned 70½ in 2019, you must still take your 2019 RMD as well as another one in 2020. But, if you turn 70½ in 2020 — and beyond — you can wait until age 72 to begin your mandatory distributions.

You can contribute to a traditional IRA after age 70½ — The new law will allow contributions to traditional IRA accounts after 70½ as long as you have enough earned income. This is a nod to the fact that many people are working after the “normal” retirement age, so still making a salary. Unfortunately, dividends and capital gains are not considered earned income.

Penalty-free withdrawals from retirement plans are allowed for adoption/birth expenses — A “qualified birth or adoption distribution” of up to $5,000 may be taken out of an eligible retirement plan upon the birth or adoption of a child.

Inherited IRA accounts — Upon the death of an account owner, distributions to individuals must be made within 10 years. Previously, there was no time limit for those distributions to take place. There are exceptions for spouses, disabled individuals and individuals who are not more than 10 years younger than the account owner, but this is certainly something to keep in mind as you select your beneficiaries.

As always, feel free to reach out to us to discuss any questions you may have about any of these changes. While nothing herein constitutes tax advice, we want to ensure you’re in the know about new laws that can affect your retirement planning. You should still seek advice from your individual tax advisor for your unique situation and needs.