While the clock was ticking down on 2019, the U.S. Congress passed and President Trump promptly signed a mammoth piece of legislation that has reverberated over the retirement world. The name of the legislation is the “Setting Every Community Up for Retirement Enhancement (SECURE) Act”. The result is a massive, plan-altering change to the Tax Code that will affect how and who inherits your retirement accounts. As with any legislation, there are advantages and disadvantages, as well as exceptions to the new rules. Highlighted below, are just a few items from the legislation you should be aware of.
Age Limit Eliminated for Traditional IRA Contributions – Beginning in 2020, the SECURE Act eliminates the age limit for traditional IRA contributions. Previous law did not allow for one to make contributions to an IRA beyond age 70 even if you were still working. Now you can. You still must have “earned income” in order to qualify to make the contribution. The contribution limit for 2020 is $7000.00 for those 50 and older.
RMD Age Raised to 72 – Most people are aware that at age 70 ½ the IRS required one to begin taking distributions from their IRA’s. This legislation increases the required minimum distribution age to 72. This can provide for a little more time and potential growth of one’s IRA account before distributions begin. This rule goes into effect for those that turn 72 in 2020. If you turned 70 ½ prior to December 31, 2019, you are still subject to the old 70 ½ age rule.
Good Bye, Stretch IRA – Under the old rules, a beneficiary of an IRA could stretch the distributions from an IRA they inherited over their life expectancy. For example, a 30 year old would have had 53.3 years to distribute inherited IRA money. The legislation changes this to 10 years for most beneficiaries. Imagine stretching a distribution over 50 years, and the tax benefits that can provide, but now be required to empty the account within 10 years!
To obtain more detailed information and to see how these changes may affect you, feel free to contact us at the Investment Center @ CCCU. Call one of our investment representatives – David Dixon, CFP® 702-982-8336 or Morgan Baum 702-939-3201.
For additional information, please review the following attachment: