The SECURE Act (Setting Every Community Up for Retirement Enhancement) became effective on January 1, 2020, and it could have a significant impact on your retirement asset distributions and taxes paid on those distributions.
Here are the top five things to know about the SECURE Act:
- The act increased the required minimum distribution (RMD) age from 70 ½ to 72. This change only applies to those individuals who turn 70 ½ in 2020 or later. Therefore, if you turned 70 ½ on December 15, 2019, you will still be required to continue RMDs under the prior rules meaning you take the first distribution in 2020. However, the SECURE Act makes no change to the date at which individuals may begin to use their IRAs and Inherited IRAs to make Qualified Charitable Distributions (QCDs). Meaning, an individual turning 70 ½ in 2020 will not have to take an RMD for 2020 but may still use their IRA to make a QCD of up to $100,000 for the year.
- The act repeals the maximum age for traditional IRA contributions. Prior law said that even if you were still working beyond age 70 ½, you were no longer able to make IRA contributions. The SECURE Act removes this age limit and allows workers of any age to contribute to their IRA.
- The act creates a 10-year payout period on all inherited IRAs and qualified plans unless paid to a surviving spouse. (Note: there are limited exceptions to this rule.) Previously, if your children inherited your retirement account, they were able to take the RMD over their lifetime. The SECURE Act requires the entire balance to be withdrawn within 10 years unless the account is paid to a surviving spouse.
- The act now allows different types of assets to be held in a 401(k) that would provide a guaranteed income stream during retirement (ex: annuity investment options).
- The act allows for Qualified Education Loan Repayments from 529 plans. Individuals can distribute up to $10,000 to pay for qualified education loans. The $10,000 limit is a per-person limit.
We will continue to explore planning opportunities available given the changes with the SECURE Act as each individual’s situation will be unique. If you have specific questions about your situation, please contact your JNBA Advisory Team or consult your tax professional and estate planning attorney.
PLEASE NOTE: JNBA is neither an attorney nor accountant, and no portion of the above should be construed as legal or accounting advice. All legal and accounting issues should be addressed with the legal and accounting professionals of your choosing.
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors, LLC.
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