Right at the end of 2019, the US Senate passed a $1.4 trillion dollar spending deal that included new retirement legislation known as the SECURE Act. Affecting many aspects of retirement, the new law may have direct implications for the middle class and their beneficiaries.
For those who may be approaching retirement, or are considering preparing for the future, familiarising yourself with these changes is a sensible idea:
Changes to Required Minimum Distribution (RMD):
Back in 2019, and beginning at the age of 70 1/2, retirees were required by law to begin taking Required Minimum Distributions, or RMD’S, from their TSP’s and IRA’s, and has long been a common and popular strategy in many people’s retirements plans. If this is your strategy, then you can now choose to postpone your first RMD for another year, until you reach the age of 72.
Stretch IRA’s come to an end:
Spreading your tax burden out over a lifelong period is a great way of planning and stretch IRA’s enabled beneficiaries to do exactly that. Leaving their assets in an inherited IRA account, they could spread out the distributions, and this so-called stretching gave many the chance to pay less in taxes while the assets in the IRA continued to grow. However, with the passing of the SECURE Act, those beneficiaries now have only a window of 10 years to deplete all the assets from their inherited IRA.
No age limit on IRA contributions:
In previous years, anyone older than 70 ½ years were not allowed to contribute to an IRA. However, since the passing of the SECURE Act, this is no longer the case and as of 2020, any person with earned wages, irrespective of their age, can contribute to an IRA.
While these changes that have come as result of the SECURE ACT may not have an immediate effect upon you as a retiree, it is important that you understand any changes that might have an impact upon you in the future. The more you know and understand, the better prepared you can be to do everything to maximise your assets and pass your wealth on efficiently. To know more about planning for your retirement and getting the most out of the money that you’ve worked hard to save, reach out to a professional company who specialize in retirement planning and give you all the up-to-date information you need.