SECURE Act? What's that? It was signed into law on December 20th and is in effect today. It basically has a few new rules that tweak the retirement savings landscape.
What does it mean? It's definitely got its pros and cons, but here is a breakdown of a few changes:
Required Minimum Distributions Must Start at Age 72 Instead of 70.5
This provides a little bit of relief as Roth conversions can be a useful tool prior to RMD age. However, if you turned 70½ in 2019, you will still need to take your RMD for 2019 no later than April 1, 2020. If you are currently receiving RMDs (or should be) because you are over age 70½, you must continue taking these RMDs. Only those who will turn 70½ in 2020 or later may wait until age 72 to begin taking required distributions.
Contributions to Traditional IRA's After Age 70½
Beginning in the 2020 tax year, the new law will allow you to contribute to your traditional IRA in the year you turn 70½ and beyond, provided you have earned income. You still may not make 2019 (prior year) traditional IRA contributions if you are over 70.5.
More Annuities in 401(k) Plans
There are definitely pros and cons to this topic (and might be beyond the scope of this post), but just be sure to consult a financial planner prior to making any decisions regarding annuities for your nest egg.
Inherited Retirement Accounts (It's time to review your beneficiaries)
Upon the death of the account owner, distributions to individual beneficiaries must be made within 10 years. There are exceptions for spouses, disabled individuals, and individuals not more than 10 years younger than the account owner. Minor children who are beneficiaries of IRA accounts also have a special exception to the 10-year rule, but only until they reach the age of majority. This is a change from the previous law that allowed some beneficiaries to "stretch" the account over the beneficiary's lifetime.
BONUS: Adoption/Birth Expenses
The new law allows penalty-free withdrawals from retirement plans for birth or adoption expenses. Each parent can use a $5,000 exemption, which means a couple could take up to $10,000 out penalty-free if they each had separate retirement accounts. While new parents can opt to repay the withdrawal amount, this is not a loan.