The “Setting Every Community Up for Retirement Enhancement Act” (a/k/a the “SECURE Act”) has passed through Congress and has been signed by President Trump, taking effect on January 1, 2020. This new law will have a significant impact on Required Minimum Distributions (RMDs) for inherited retirement accounts. Anyone who has a retirement account, or is set to receive an inherited retirement account, should be aware of these changes.
Every kind of retirement account has an RMD, which is a minimum amount that must be withdrawn from the account each year after the account vests. RMDs start at a specific age and continue until the account is empty. If the account’s owner dies before the account empties, the remainder of the account is passed down to the owner’s designated beneficiaries, just like any other inherited property. A person is always free to take more than required by the RMD (with possible tax consequences), but they must at least take the minimum required by the account every year.
There are four important changes related to RMDs as a result of the SECURE Act. First, the age at which RMDs begin will rise from 70 ½ to 72. Second, any designated beneficiaries will need to take the entire value of the retirement accounts over a 10-year span, rather than stretching it out over their entire lifetimes subject to limited exceptions. Third, the age limit for IRA contributions has been repealed, allowing someone to continue contributing to their traditional IRA accounts even if they work past the typical retirement age. And finally, the law increases access to annuities from a 401(k) plan, creating an additional source of potential funding for their retirement accounts.
Planning your retirement is a complicated process, and one you should not do alone. The attorneys at Hunziker, Jones & Sweeney, P.A., will help you put together a retirement plan that is right for you. They can also advise how your plan, and your beneficiaries, may be affected by the changes resulting from the SECURE Act. Just send us an email at email@example.com (or use our contact us form), and we will reply as quickly as possible. You can also reach us by phone at (973) 256-0456.