SECURE Act of 2019 Offers Provisions for Retirement Security

Just before the start of the new year, President Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. As its name implies, the goal of the SECURE Act is to help individuals increase their savings for retirement security. We’ve outlined the key takeaways for you below regarding changes to the IRA contribution age, the Required Minimum Distribution age and the removal of the stretch IRA, as well as some provisions that have not changed.

Previously Now Effective
IRA Contribution Age No contributions after age 70 1/2 No age restriction as long as earned income January 1, 2020
Required Minimum Distribution (RMD) Age RMD required by April 1 after age 70 1/2 RMD required by April 1 after age 72 Individuals who turn age 70 1/2 after December 31, 2019
IRA Non-Spouse Beneficiaries Able to “stretch” inherited IRA over their own life expectancy (if longer than expectancy of deceased owner) Non-spouse beneficiaries must withdraw the IRA over 10 years Anyone who passes in 2020 and beyond
IRA Spouse Beneficiaries Able to “stretch” inherited IRA over their own life expectancy (if longer than expectancy of deceased owner) No change
Qualified Charitable Distributions (QCDs) QCDs of up to $100,000 directly to charity No change

Changes to IRA Contribution Age

Previously, individuals were not permitted to make any contributions to their traditional IRAs once they reached 70 ½ years of age. Beginning on January 1, 2020, that age restriction has been lifted, allowing individuals to contribute at any age so long as they have earned income from wages or self-employment.

Changes to Required Minimum Distribution (RMD) Age

Previously, individuals were forced to take a required minimum distribution (RMD) by the first of April after reaching age 70 ½. However, people are now living longer than ever before and may not necessarily need to take taxable distributions from their IRAs at that age. The SECURE Act now provides individuals another year and a half before needing to initiate their RMD, allowing until the first of April following their 72nd birthday.

This provision goes into effect for individuals who turn 70 ½ after December 31, 2019.

Removal of the Stretch IRA

For years, IRA owners’ non-spouse beneficiaries were able to “stretch” their inherited IRAs over their own life expectancy after the owner passed. This allowed the beneficiaries to comply with the IRS while allowing their inherited IRA to compound for future benefit.

Now, “stretch” IRAs are a thing of the past. For anyone who passes in 2020 or beyond and leaves their IRA to a non-spouse beneficiary, that beneficiary is required to withdraw the IRA over the span of 10 years.

Provisions That Have Not Changed

There are several provisions that have not changed with the SECURE Act updates. For individuals who pass in 2020 or beyond and leave their IRA to a spouse beneficiary, there is no change – the spouse may still maintain that IRA for the duration of their own life expectancy (assuming it is longer than the life expectancy of the deceased owner).

Also, individuals age 70 ½ or older are still allowed to make Qualified Charitable Distributions (QCDs), which are transfers of up to $100,000 from their IRAs directly to a qualified charity.

Contact BSSF Today

The above listed provisions are just a few takeaways of the updates contained within the SECURE Act. As we move forward into 2020, we encourage you to contact the team at BSSF to discuss how these changes may affect you and strategize the appropriate solutions.