Skip to main content

Golden Years Financial

The SECURE Act

The ‘Setting Every Community Up for Retirement Enhancement Act’, better known as “The SECURE Act” was signed into law on December, 20, 2020.  Following is our understanding of the most relevant aspects of this legislation:

  • Required Minimum Distribution (RMD) start date changed no later than April 1 of the year after someone turns age 70 ½ to no later than April 1 of the year after someone  turns age 72.  (This only applies to investors under the age of 70 ½ as of January 1, 2020.
  • Beginning in calendar year 2020, individuals over the age of 70 ½ who are still actively earning income may contribute to a Traditional (i.e. tax-deferred) IRA as well as a ROTH-IRA.
  • RMD may no longer be “stretched” over the entire lifetime of any beneficiary.   Following the death of an “Eligible beneficiary”* IRA’s must now be distributed within ten years of the deceased’s passing.**    In the case of minor children, however, IRA values may be stretched up to the age of majority before the “10-year clock” starts.
  • The 10-year rule also eliminates RMD requirements during the ten year period, thus allowing beneficiaries to distribute any amount, regardless of size
  • The new law allows penalty-free withdrawals from retirement plans for birth or adoption expenses, up to certain limits.

In short, this new law is designed to generate revenue for the government in the form of income taxes, by forcing assets out of tax-deferred accounts over a shorter time horizon.

 

*An”eligible beneficiary” is defined as the surviving spouse of the deceased account owner; a minor child of the deceased account owner; a beneficiary who is no more than ten years younger than the deceased account owner; a chronically-ill individual.

**Trusts are not immune from the ten year rule.

 

Check the background of this financial professional on FINRA's BrokerCheck
Check the background of this financial professional on FINRA's BrokerCheck