How the SECURE Act May Affect Your IRA

by Matt Roberts, MFM, CFP®, CAP®, Chief Planning Officer | February 6, 2020

With Congress passing the SECURE Act in late December of 2019, it is important to know how it could potentially affect your retirement accounts. This is one of the most significant retirement bills in the last decade. Here are the key provisions:

Required Minimum Distributions (RMDs)

Starting January 1, 2020, the age at which you need to start withdrawing money from traditional retirement accounts will move from 70 ½ to 72. Those who are already 70 ½ should continue with their current plan for RMDs. If you turn 70 ½ in 2020, you will have an extra year and a half to begin withdrawals.

Elimination of "Stretch" option for Inherited IRAs

For inheritors of IRAs, they will no longer be able to stretch RMDs over their lifetime. This was a popular strategy to help minimize the taxation from Inherited IRAs. Beginning January 1, 2020, IRA beneficiaries will need to distribute the entire IRA within 10 years. This provision is not retroactive and will not affect those who already have inherited an IRA. In addition, an IRA inherited from a spouse is not subject to these rules.

Contributions to Traditional IRAs after Age 70 ½

The new law will allow you to contribute to your traditional IRA in the year you turn 70 ½ and beyond. This was not the case under the old rules. If you have earned income, and are eligible for contributions based on income phase outs, you can contribute up to $7,000 per year. There is currently no age cap for contributions to a Roth IRA and that will not change.

Additional use for 529 Plans

In addition to the current qualified 529 plan expenses, the new law allows for up to $10,000 to be used for repayment of student loan debt. This is a lifetime amount, not an annual limit. However, this can be used for each beneficiary of a 529 plan.
Our team at Syverson Strege is ready to help answer any questions that you may have about how the SECURE Act may affect your situation. Please do not hesitate to contact your Planner or Associate Planner for more information.