It’s a new year, and for some owners of IRAs and other retirement accounts that means the cycle of calculating your Required Minimum Distributions (“RMDs”) begins all over again.

In December 2019 Congress passed, and President Trump signed, the SECURE Act. The law went into effect January 1, 2020.

The SECURE Act includes a number of provisions that affect distributions from qualified retirement accounts, like 401(k) plans and IRAs.

Required Minimum Distributions
Previously, owners of qualified retirement accounts had to begin taking RMDs when they turned 70 1/2. The SECURE Act increases that age to 72.

Importantly, if you turned 70 1/2 in 2019 (i.e. your birthday is on or before June 30, 1949), you will still need to take a Required Minimum Distribution this year. If you’re a Springwater client, we will perform this calculation for your managed accounts, and help you take the distribution. The fact that you might not be 72 in 2020 does not relieve you of the burden to continue taking your RMDs.

However, if you will turn 70 1/2 in 2020 (i.e. your birthday is on or after July 1, 1949), you will not be required to begin withdrawing RMDs until the year you turn 72.

Qualified Charitable Distributions
The SECURE Act makes no changes to the date at which you may begin to use your IRAs (and inherited IRAs) to make Qualified Charitable Distributions. So, even if you turn 70 1/2 in 2020 and do not have to take an RMD this year, you may still use your IRA to make a QCD of up to $100,000 for the year (after actually turning 70 1/2, or later). Beginning in the year you turn 72, any amounts given to charity via a QCD will reduce your RMD as well (while in the prior 1-2 years, it will simply allow the pre-tax IRA to be used for charitable contributions directly, on a pre-tax basis).

Working Past Age 70 1/2
Finally, until this year, you could not make contributions to a traditional IRA for the year during which you reached age 70 ½, or any later year. The SECURE Act repeals the age restriction on contributions to traditional IRAs. So, beginning with the 2020 tax year, you can make IRA contributions after reaching age 70 1/2. There’s no age restriction on Roth IRA contributions, and the SECURE Act does not change that.

If you have any questions about the SECURE Act and how it may impact your situation, feel free to give us a call at (888) 998-4796 or send an email to questions@springwaterwealth.com. We’d love to help!

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