Presented by: Vision Financial Group, Inc.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act is now law. With it comes some of the biggest changes to retirement savings law in recent years. While the new rules don’t appear to amount to a massive upheaval, the SECURE Act will require a change in strategy for many Americans. For others, it may reveal new opportunities.
Limits on stretch IRAs. The legislation “modifies” the required minimum distribution rules in regard to defined contribution plans and Individual Retirement Account (IRA) balances upon the death of the account owner. Under the new rules, distributions to individuals are generally required to be distributed by the end of the 10th calendar year following the year of the account owner’s death. Penalties may occur for missed RMDs. Any RMDs are due for the original owner must be taken by their deadlines to avoid penalties. A surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and child of the IRA owner who has not reached the age of majority may have other minimum distribution requirements.
IRA contributions and distributions. Another major change is the removal of the age limit for traditional IRA contributions. Before the SECURE Act, you were required to stop making contributions at age 70 ½. Now, you can continue to make contributions as long as you meet the earned-income requirement. Also, as part of the Act, you are mandated to begin taking required minimum distributions (RMDs) from a traditional IRA at age 72, an increase from the prior 70 ½. Allowing money to remain in a tax-deferred account for an additional 18 months may alter some previous projections of your retirement income.
The SECURE Act’s rule change for RMDs only affects Americans turning 70 ½ in 2020. For these taxpayers, RMDs will become mandatory at age 72. If you meet this criterion, your first RMD won’t be necessary until April 1 of the year you turn 72. While the SECURE Act represents some of the most significant changes we have seen to the laws governing financial saving for retirement, it’s important to remember that these changes have been anticipated for a while now. If you have questions or concerns, reach out to your trusted financial professional.
-Bill Dowell is a Registered Representative of ProEquities, Inc. & Registered Broker-Dealer, Member FINRA & SIPC.
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Vision Financial Group, Inc. is independent of ProEquities, Inc. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party nor their affiliates.