The Setting Every Community Up for Retirement Enhancement (SECURE) Act is now law. Here’s an overview of several key changes:
- Removed age limit for Traditional Individual Retirement Account (IRA) contributions: The age limit for Traditional IRA contributions has been eliminated. Now, you can continue to make contributions past age 70½ as long as you meet the earned-income requirement.1 Before the SECURE Act, you were required to stop making contributions at age 70½.
- Increased age for IRA Required Minimum Distributions (RMDs): The Act increases the age from 70½ to 72 for those individuals born on or after July 1, 1949. Those individuals are not required to begin an annual minimum distribution from their retirement account until the year they reach age 72 allowing their money to remain in a tax-deferred account for an additional 18 months, providing greater flexibility for using their retirement income.2
However, those individuals who have attained age 70½ in 2019 would need to continue to take RMDs in 2020 and thereafter.
- Limits on Stretch IRAs: Under the new rules, distributions to non-eligible designated beneficiaries generally must be distributed by the end of the 10th calendar year anniversary of the account owner’s passing. Under the former law, for those who passed at the end of 2019, designated non-spouse beneficiaries could take distributions over their life expectancy.
The ten year limit does not apply to eligible designated beneficiaries such as the surviving spouse and minor child of the IRA owner.3
- Part-time employees can participate in workplace retirement plans: Before the SECURE Act, retirement plans were generally not offered to employees who worked fewer than 1,000 hours per year. Now, part-time employees can participate in a workplace retirement plan if they have either worked 1,000 hours in one year or have worked at least 500 hours per year for three consecutive years.
For more insight on how the SECURE Act may impact your estate plan, contact CEFCU Wealth Management at 1.800.356.7865, ext. 33836 or cefcu.com/wealth.
If you’d like guidance to modify or start a retirement savings plan, contact CEFCU Investment Services at 1.800.356.7865, ext. 32571 or cefcu.com/invest.
1 §114 in Title V Revenue Provision of Division O (“Setting Every Community Up for Retirement Enhancement”) of the Further Consolidated Appropriations Act, 2020.
2 §401 in Title V Revenue Provision of Division O (“Setting Every Community Up for Retirement Enhancement”) of the Further Consolidated Appropriations Act, 2020.
3 Eligible Designated Beneficiary is defined as: (1) spouse, (2) minor child of IRA owner, (3) disabled beneficiary as defined in section 72(m)(7) of the IRS Code, (4) chronically ill beneficiary as defined in section 7702B(c)(2) of the IRS code, and (5) an individual not described in items 1-4, who is not more than 10 years younger than the IRA owner. §401 in Title V Revenue Provision of Division O (“Setting Every Community Up for Retirement Enhancement”) of the Further Consolidated Appropriations Act, 2020.
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