The SECURE Act is now in effect and many people might not know what it is or how it impacts them. Some of the main components of the SECURE Act include changes for retirement accounts such as the age you need to start taking required minimum distributions, the age of contributing to IRA's, and Stretch IRA's. The following items for the SECURE Act are in effect starting January 1st 2020.
Required Minimum Distributions
The SECURE Act affects required minimum distributions (RMD's) in many ways. One of the changes for RMD's include the age you need to start taking RMD's. The prior law was that you needed to start taking RMD's by April 1st following the year you turned 70½. You then would need to take your annual RMD by December 31st of every year. The SECURE Act now says that you don't need to start taking RMD's until the year you turn 72.
Contributions To Traditional IRA's
The prior law used to be that you could not contribute to an IRA after you reach age 70½, even if you were still working. The SECURE Act has changed this and says that there is no age limit for contributions to a Traditional IRA. In order to be eligible to contribute, you must still have compensation.
The SECURE Act is making STRETCH IRA's no longer an option regarding your accounts. If you decide to leave an IRA to a non-spouse beneficiary, the beneficiary will have until the end of the 10th calendar year to withdraw all the funds from the account. The beneficiary used to be able to take withdrawals based on their life expectancy, but they are now required to have all the funds withdrawn by the end of the 10th year. There is no yearly minimum that needs to be taken anymore as the funds need to be fully withdrawn within 10 years.