The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted Jan. 1, 2020. With it came many questions for those who are planning for retirement, retired or who are retiring in the near future.
Passed as part of a spending bill, the SECURE Act brought with it the most significant changes to retirement plans since 2006. While some changes impact you, others will impact the people you name as a beneficiary.
Changes to Know
- You can contribute to your IRA longer. Previously, you could not contribute to your IRA after reaching the age of 70½. However, more and more people are working past that age. The SECURE Act repeals this age limitation, allowing you more time to save.
- The required minimum distribution (RMD) age changed. The SECURE Act changed the age at which you must start taking RMDs from your retirement account from 70½ to 72 for those who were born July 1, 1949, or later. This change allows you additional time to grow the funds in your account before you have to start withdrawing from it. (Note: The RMD requirement has been waived for 2020, per the CARES Act signed into law on March 27, 2020.)
- Beneficiary rules have changed. Prior to the SECURE Act, beneficiaries could take distributions throughout their lives. This offered tax savings for the beneficiary. The SECURE Act preserved this option for beneficiaries who are spouses, but repeals it for most non-spousal beneficiaries. While the new law carves out some exceptions (listed below), most beneficiaries who used to be able to stretch out distributions over their lifetime will now have up to 10 years to withdraw the entire amount.
Non-Spousal Beneficiary Exceptions Include:- A child of the employee who has not reached the age of majority.
- A disabled individual.
- A chronically ill individual.
- An individual who is not more than 10 years younger than the employee who died.
What Stayed the Same
If you’re 70½ or older, you can still make a tax-free gift to a qualified charitable organization. You can transfer any amount up to $100,000 per year directly to a qualified charitable organization without paying income tax on the distribution. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions. Your gift will also be put to use today, allowing you to see the difference you’re making. Please contact Amy Walling at awalling@sdsu.edu or (619) 508-9255 to discuss your benefits.
Review Your Plans
If you have questions about the impact of the SECURE Act on your retirement plans, be sure to make an appointment with your financial advisor. They can review the plans you have in place (including your beneficiary designations) and help make sure you are still on the right track.