How could the SECURE Act impact your retirement plans?

Here’s how some of the major changes in this legislation may impact you.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law over the holidays, and it went into effect Jan. 1, 2020. This legislation will make some major changes in retirement planning.

Here are a few of the changes that may affect you this year and beyond.

  • Moving the age for required minimum distributions (RMD) from 70½ to 72 – The age for taking required minimum distributions from your retirement accounts (e.g., 403(b), 401(k), traditional IRA) has been moved from 70½ to 72. If you don’t need to take money out of your account(s) at age 70½, now you won’t have to until age 72. (If you reached age 70½ in 2019 or before, you will still have to take RMDs out of your qualifying retirement accounts.)
  • You can continue to contribute to a traditional IRA after age 70½ – Previously, if you were working past age 70½, you could not contribute to a traditional IRA past that age. That restriction is removed, and now, as long as you have sufficient taxable earned income, you can contribute up to $6,000 to a traditional IRA in 2020. And if you are over age 50, you can contribute an additional $1,000.
  • Inherited retirement account distributions must occur within 10 years – For most non-spouse beneficiaries of retirement accounts, including trust beneficiaries, the entire balance of an inherited account must be distributed no later than the end of the 10th year after the death of the original account holder. This is effective for deaths occurring in 2020 or later for IRAs but is delayed until 2022 for government plans, such as 403(b) and 457(b). There are some exceptions to the new rules (for example, disabled or minor beneficiaries). In the past, a non-spouse beneficiary of an IRA or defined contribution plan could stretch out RMDs from the IRA or plan over that person’s lifetime.

Depending on your situation, there may be other SECURE Act changes that affect your retirement saving or income plans. You will want to discuss these changes with your tax, legal and financial advisors.

The information provided here is for general informational purposes only and should not be considered personalized tax, legal or investment advice. This information reflects a summary of our current understanding of certain provisions in the SECURE Act. There are other significant changes in the SECURE Act that may impact your long-term financial planning. As with any new law, the SECURE Act’s meaning is subject to further clarification and change, as many questions are yet to be answered. You should consult with your tax, legal and financial advisors regarding your specific situation.

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WBTL-0804 (Feb. 20)

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