What you Need to Know about the SECURE Act Changes

What you Need to Know about the SECURE Act Changes

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The SECURE Act was signed into law at the end of 2019 and has several changes that may impact you. Below are the key changes for you to be aware of:

Required Minimum Distribution starting age was changed from 70 ½ to 72. 

What does this mean for you? 

Old Law:  You were required to take distributions from your retirement accounts in the year you turned 70 ½. 

New Law: Some will have an extra year, and others will have an extra two years before they are forced to make withdrawals from their retirement accounts.    This only applies to those who turn 70 ½ in 2020 or later. 

Why is this important?  

When you take distributions from your retirement accounts, you must pay federal and possibly state income tax (retirement plan distributions are exempt from tax in Illinois and several other states). Under new law, you can defer the taxes on these distributions.   

The Age Cap on IRA Contributions was Eliminated

What does this mean for you? 

Old Law: You could not make contributions to a traditional IRA in any year in which you turned 70 ½ or older by the end of the year.  

New Law: There is no age limit on traditional IRA contributions. 

Why is this important?  

If you are still working, you may be able to get a tax deduction for making an IRA contribution past the age of 70 ½.  It may allow for you to reduce your taxes.

Inherited IRA Withdrawal Requirements Have Changed Significantly

What does this mean for you?  

If you inherit money in 2020 or later, you will no longer be able to withdraw the money over your projected lifespan.  Under the new law, most beneficiaries will be required to take the money out of the inherited IRA within 10 years.  This only applies to non-spousal beneficiaries. 

Why is this important?  

This is accelerating the payment of tax upon an inherited IRA from anyone other than your spouse.  You should review the current beneficiaries to ensure no changes are warranted.

For more information regarding the SECURE Act, please visit: https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/InvComTheSECUREactMatters 

The SECURE Act impacts the financial planning we do for our clients.  Please do not hesitate to call or email us with any questions that you may have about your unique circumstances.

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