The Setting Every Community Up for Retirement Enhancement act (SECURE act) has been receiving a lot of press lately, and deservedly so. The act does make some significant changes to the rules around IRA contributions and distributions, and the House and Senate waited till the last minute to pass the act.
On a slightly different note, I have always been a Washington Capitals fan and have become even more of a fan of hockey in general now that my son has gotten into the sport. The Capitals have the best record in the league as of now, and they had one of their craziest last-minute-wins of the season this past Sunday.
The San Jose Sharks probably thought they had SECUREd (ha ha!) a victory when they were up 3-2 and then 4-2 on an empty net goal with one minute left in the game. I have to admit that while I did leave the game on in the background, I moved on to household chores, etc. once it was 4-2 figuring ‘game over.’ Since I wouldn’t be writing about this if the Caps didn’t come back, you can probably guess what happened. The team scored TWO goals in less than a minute and went on to win in overtime. Their goalie (Braden Holtby) had some amazing saves in overtime to keep the team in the game. See the highlights here: https://www.youtube.com/watch?v=JxeHo-fpgas
Much like the Caps waiting till the last minute to SECURE (I can keep going! 😊) a victory, the House and Senate scrambled to approve this latest change to retirement savings. While I am not certain it will “set every community up for retirement enhancement,” it does change quite a few things for retirement savers. Borrowing from our own e-mail to clients, here are the highlights:
- The law becomes effective on January 1, 2020 (with a few exceptions). It was passed by the House of Representatives on 12/17/2019 and by the Senate on 12/19/2019.
- For most non-spouse beneficiaries (children, grandchildren, etc.) of deceased IRA owners, the distribution of all assets will have to occur within 10 years. This is a significant change from the previous rule, which allowed beneficiaries to “stretch” the distributions over their lifetimes. Note that this does not affect any inherited IRA owners already taking distributions.
- The law increases the age at which you are required to take distributions from your IRA from age 70 ½ to age 72. If you reached age 70 ½ in 2019, you do still need to take a distribution in 2020
- The law removes the age restriction for contributions to traditional IRAs. Previously, anyone over the age of 70 ½ was prohibited from making a contribution.
Don’t wait till the last minute to adjust your retirement planning accordingly. It’s always important to make sure your beneficiaries are up to date, and if your beneficiaries include children and grandchildren, pay extra attention to their potential tax situation should they inherit a significant portion of your assets.
Hopefully it goes without saying, but every situation is different. Please consult your trusted advisor(s) to determine the best approach for you and your family.