How does the SECURE Act affect you?

  1. Increase in age for required minimum distribution – Beginning in 2020, the law increased the required minimum distribution (RMD) age from 70 1/2 to 72. Anyone turning 70 1/2 in 2020 is not required to take an RMD. Anyone who has started RMD’s prior to 2020 will need to continue taking them going forward.  (Note: A Roth IRA set up in your own name does not require that you take an RMD and the SECURE Act does not change that.) The following chart shows the implementation of this provision by year and by age:
  2. RMD Required
    Birth Date Age 2020 2021 2022 2023
    On or before June 30, 1949 70 1/2 Y Y Y Y
    July 1, 1949 to Dec. 31 1949 72 N Y Y Y
    Jan. 1, 1950 to Dec. 31, 1950 72 N N Y Y
    Jan. 1, 1951 to Dec. 31, 1951 72 N N N Y 2
  3. Removal of the “stretch” IRA option – For certain non-spouse beneficiaries an inherited IRA will need to be distributed by the end of the 10th calendar year following the individuals death. All inherited IRA’s with a death date of 2019 or before retain the ability to stretch the distribution over the beneficiary’s IRS-defined life expectancy even if the account is created in 2020 (i.e., pass away in 2019 and elect stretch in 2020) 
  4. Repeal of maximum age for traditional IRA contributions – Any person over 70 1/2 who has U.S. earned income will be eligible to make contributions to a traditional IRA starting in 2020. (There are no age restrictions on Roth IRA contributions, and the SECURE Act does not change that.)
  5. What about the Qualified Charitable Distribution (QCD) provision? – This provision, in effect since 2004, allows those reaching 70 1/2 to make a distribution of up to $100,000 directly from their traditional IRA to charities of their choice. Millions of taxpayers with charitable intent have utilized this provision to do “tax smart” giving from their IRAs. This provision is still in tact. However, deductible IRA contributions made for the year you reach 70 1/2 and later years may reduce your annual QCD allowance. Because the rules around this are technical and very specific, you will need to consult your tax adviser for further clarification.
  6. Expansion of section 529 plans – Parents can now use their 529 account to cover the costs associated with registered apprenticeships and for up to $10,000 of qualified student loan repayments.  
  7. Tax credits for business retirement plans – The new law increases the maximum credit for start up plans from $500 to $5,000. A new credit of $500 is also available for some smaller employers who set up automatic enrollment in their plans.  
  8. No-Penalty Qualified Birth and Adoption Distribution – With the new law, up to $5,000 can be distributed penalty-free from an IRA or qualified plan for a “qualified birth or adoption” of a child. To meet the requirements, the distribution must be taken one year from either the date of birth or date the adoption is finalized. The $5,000 is a per-child limit per parent. Therefore, if each parent has a qualified plan, then each parent is eligible for the $5,000 penalty-free distribution for a total of $10,000.