The SECURE Act Brings Major Changes to Retirement Plans

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The Setting Every Community Up for Retirement Act (“SECURE Act”) was previously approved by the U.S. House of Representatives before failing to advance beyond the Senate. The Act, however, found new life when it was included in a year-end spending bill that all parties were keen to approve to prevent a government shutdown. The President signed the spending bill on December 20, thus enacting the SECURE Act and ushering in significant changes for retirement investors.

The big takeaway - Traditional IRA holders can fund their accounts for as long as they want and avoid required minimum distributions for a bit longer. Key provisions in the SECURE Act include, among others:

 
  • Traditional IRA contributions can now be made at any age – Previously, Traditional IRA holders could contribute until the age of 70 ½. Traditional IRA holders can now make contributions at any age. This, when supplemented with one’s ongoing ability to consolidate retirement holdings via transfer or rollover, enables account holders to maintain higher retirement balances later in life and provide continued opportunities for self-directed investments.

  • The required minimum distribution (“RMD”) age raised to 72 – Pre-tax account holders (Traditional IRA, SEP IRA, Solo 401(k), etc.) were previously required to begin taking required minimum distributions at age 70 ½, but they may now wait until age 72.

  • Non-spouse Inherited IRAs must be fully distributed within 10 calendar years – The Act addresses a series of factors that may impact this requirement for non-spouse Inherited IRAs. Consult with your financial advisor or tax professional for more information.

  • Penalty-free distributions for new parental expenses – There are several situations in which retirement funds may be distributed penalty-free (though taxes may still apply). Per the SECURE Act, those who take “qualified birth or adoption distributions” may enjoy similar penalty breaks.
 

Click here to review the full SECURE Act. These changes—which appear poised to take effect for any accounts active as of January 1, 2020—carry considerable ramifications for retirement investors, and for Traditional IRA holders in particular.

Please don’t hesitate to give us a call at 877-742-1270 or send us an e-mail at info@ndtco.com if you have any questions about your account with us. For more detailed information or interpretations of the SECURE Act, please consult with your financial advisor or tax professional.