An Overview of What’s in the SECURE Act

THE SECURE ACT

AN OVERVIEW OF

WHAT’S IN THE SECURE ACT

BRIAN VNAK Vice President, Advisory Services

The SECURE Act is the largest retirement-focused legislative reform in decades. Its provisions impact individual investors and the retirement plans they may have access to through employers. These changes were intended to improve access to and attractiveness of retirement plans to help address Americans’ growing concerns over their ability to save for their own retirement.

While many provisions are small (and potentially not applicable to many individuals), the breadth of the bill is such that all workers, investors and retirees will need to review their financial plans to ensure that potential opportunities are seized and landmines are averted.

Retirement Provisions Impacting Individuals

RMD Age Changes to 72

Beginning in 2020, the SECURE Act raises the age at which retirees must start required minimum distributions (RMDs) from 70 ½ to 72. Individuals who reached 70 ½ in 2019 will continue to fall under the old rules and need to continue RMDs.

“Stretch” IRA Provisions Replaced by 10-Year Rule

This new rule requires non-spouse beneficiaries to distribute the full amount in the qualified account (IRA, 401(k), etc.) within 10 years. There is no “account minimum” exempt from this rule, however, spouses, minor children of the deceased, disabled and chronically ill individuals are exempt.

This rule applies to inherited accounts where the owner died in 2020 or later. Individuals who inherited an account prior to 2020 will remain subject to the pre-SECURE Act laws and regulations and be able to “stretch” distributions and taxes owed over the their lifetime.

IRA Contribution Rules Expanded

The SECURE Act eliminates the age limit on Traditional IRA contributions. As long as you have earned income, you can continue to make deductible or non-deductible contributions to a Traditional IRA, regardless of your age.

Additional changes now provide graduate students increased opportunities for tax-deferred saving. Graduate students can now count taxable stipends and non-tuition fellowship payments as earned income for the purposes of making Traditional or Roth IRA contributions.

Penalty-Free Withdrawals for Birth and Adoption Expenses

Under the SECURE Act, individuals will be allowed to withdraw up to $5,000 penalty-free from retirement accounts to help cover birth and adoption expenses. While penalty-free, distributions will remain taxable.