Prepared by Jeslynn C. Smith, Koler Law Office

Congress passed the SECURE Act (Setting Every Community Up for Retirement Enhancement) in December of 2019. The new changes went into effect as of January 1, 2020. These new law changes may affect the way you structure your estate plan and other considerations with your retirement savings.

Inherited IRA Change

If your loved one passed away before January 1, 2020, there are no changes to the inherited IRA distributions schedule. However, as of January 1, 2020, if your loved one passes away, there is a limitation on how long you can extend or “stretch” the IRA. Previously, the beneficiary could stretch the IRA over their life expectancy. Under the new law, the IRA will need to be withdrawn within a 10-year period. The law does give an exemption to the 10-year period for a surviving spouse, minor child, a disabled or chronically ill individual, and beneficiaries who are less than 10 years younger than the person who passed.

Required Minimum Distributions

Under the old law, required minimum distributions (“RMD”) started once an individual reached age 70 ½. Now that individuals are living longer and therefore working longer, Congress decided to raise the RMDs to age 72. This will allow folks that are working to continue to grow their retirement.

Age Contribution Rules

Beginning January 1, 2020, there no longer is an age restriction as to when you can stop putting money into your retirement. Before the law passed, the contribution rules stopped you from putting additional money in after age 70 ½ when you started your RMDs. This will not allow folks who continue to work to grow their retirement savings by continuing their contributions while they work over age 70 ½.

Birth or Adoption

Typically folks will pay a 10% penalty for an early distribution out of their retirement. Under the SECURE Act, if you have a birth of adoption of a child, you can now take a distribution out of your retirement up to $5,000 without paying a penalty.

This change will affect how some clients structure their estate plans. We recommend that you contact our office to schedule an appointment to evaluate your options and to answer any questions you have concerning the SECURE Act.

Don’t hesitate to schedule a complimentary consultation, right here.