The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019. One of the key changes is the date you need to begin taking your RMD – or Required Minimum Distribution.
Under the old law, plan participants and IRA owners had to begin taking distributions at age 70½. The new SECURE Act delays RMDs until age 72. This provision recognizes that life expectancy has increased since the first RMD rules were created in 1986.
The change in RMD rules can be confusing for people who turned (or are about to turn) 70 ½ in 2019 or 2020.
If you were born between January 1 and June 30 in 1949, the new rule does not affect you, because you reached 70 ½ in 2019 and were subject to a 2019 RMD. If you did not take your RMD last year, you had the option of delaying it until April 1, 2020.
If you were born between July 1 and December 31 in 1949, the new law does apply to you, because you will turn 70 ½ in 2020. Your first RMD will not be due until 2021, the year you turn 72. Plus, you’ll no longer have to calculate your half-birthday.
Other Planning Considerations
In addition to a big change to RMD rules, the SECURE Act expanded opportunities to contribute for both individuals and small businesses setting up plans for their employees. On the other hand, the new legislation also restricted some estate planning opportunities by eliminating the Stretch IRA. You can read a summary in my previous blog: How Recent Legislation Will Affect Your Retirement (link).
One great charitable giving strategy that utilizes your IRA was surprisingly not affected. In my next blog I’ll write more about how you can use your IRA to make charitable contributions.
M Financial Planning Services is located in Marlton at 57 S. Maple Ave. Call Ed at 856-810-7701 or email him at firstname.lastname@example.org. Visit www.mfinancial.us. M Financial Planning Services is not affiliated with and securities offered through LPL Financial, Member FINRA/SIPC. The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with a qualified tax advisor.