Recent legislation has put forth the SECURE Act of 2019. The new law brings about several changes that effect both individuals and employers. The SECURE Act went into effect on January 1st, 2020. Below are a few highlights that might affect you immediately.
Required Minimum Distribution (RMD) Increased to 72
The age requirement for RMDs is now 72 versus that famous 70½ age. You are no longer required to start taking RMDs at 70½ but rather at 72 years of age. This change does not apply to those who were already 70½ before 2020. Everybody who was 70½ at the end of the year 2019 is still under the old 70½ rule/requirement.
No Age Restrictions on IRA Contributions
Our society is finding more people who are working longer and one of the things they removed is the age restriction on when you can contribute to IRA contributions. Before, you had to stop contributing as soon as you started taking RMDs, but no longer. Now, there are no age restrictions. If you work and you have compensation, you can contribute to your traditional IRA. If you work beyond 72, you still have to take your RMD, but you can also still contribute if you’re working. Contributions could possibly offset some of the taxes imposed on RMDs. We say possibly as the age elimination does not change the previous established income limitations for deductibility, etc.
You Can No Longer Stretch an Inherited IRA or 401(k)
There’s no longer a stretch IRA. Ieast, if you inherited an IRA or 401k from someone other than you’re a spouse, you could extend the distributions from that inheritance for the rest of your life. The new law requires that such an inheritance be distributed within 10 years of receipt. There are no specifications detailing how you must take it (i.e. equal installments, lump sum, etc). The only requirement is that the account needs to be depleted within 10 years counting from the year after the date of death.
These are merely a few highlights that might present personal planning opportunities for you. There are many more changes that the law brings about, including small business opportunities. We welcome you to reach out to us if you have any further questions or want to look at your particular situation. Call us anytime at 407-210-3888.
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