Setting Every Community Up for Retirement Enhancements Act of 2019, better known as the SECURE Act, was signed into law on December 20th, 2019. There are many aspects to the new bill, but for purposes of this summary, we will focus on the required minimum distribution (RMD) age being increased to 72 and changes to inherited IRA distribution rules.
Required Minimum Distribution (RMD): The bill changes the age at which individuals need to begin taking their required minimum distribution from the year they turn 70 ½ to now age 72. This applies to individuals that are not 70 ½ by December 31st, 2019. For anyone who turned 70 ½ up to and including December 31st, 2019, they are under the old rules and must continue to take their RMDs, but if you obtain the age of 70 ½ after December 31st, 2019, then you’re not required to start calculating and taking your RMD until age 72.
Inherited IRA Distribution Rules: For individuals who inherited an IRA prior to January 1st, 2020, no changes to current distribution schedules are required. However, for individuals that inherit an IRA from an individual who passed away after December 31st, 2019 fewer beneficiaries will be able to extend distributions from the inherited IRA over their lifetime. Commonly referred to as a “stretch IRA” will no longer be available unless you meet certain exceptions. The bill now requires beneficiaries withdraw all assets from the inherited IRA within 10 years following the death of the original account holder who passed away after December 31st, 2019. Exceptions to the 10-year distribution requirement include assets left to a surviving spouse, a minor child, a disabled or chronically ill individual and beneficiaries who are less than 10 years younger than the decedent.
Exploring estate and tax strategies is more important than ever. Feel free to contact United Asset Strategies to get answers to questions regarding the new Secure Act and request an appointment for the New Year!
Erin Gibbons, Senior Financial Planner