For Mark Roberts’ Use: In response to concerns about the state of retirement planning in the US, President Trump signed the SECURE Act last month. The Setting Every Community Up for Retirement Enhancement Act aims to address the fact that one-quarter of Americans have no retirement savings whatsoever. Meanwhile, those who are saving for retirement might still find the process daunting.
What exact provisions does the SECURE Act bring to the table? Here’s a rundown:
Age restrictions on IRA contributions are lifted. Beginning in 2020, you can continue making contributions to an IRA past age 70 ½. This is great news for those who aren’t ready to retire at age 70 ½, or who otherwise generate income that they want to stash for future needs.
This provision begins in the tax year 2020; if you turned 70 ½ in 2019, any contributions made between now and the usual deadline of April 15 must be counted toward the 2020 tax year.
The age for required minimum distributions (RMDs) is raised. Previously, RMDs began at age 70 ½. The new deadline is age 72, although this rule does not apply to those whom already turned 70 ½ in 2019 or earlier.
There is one caveat: If you reach age 72 and you’re still working, you don’t have to take RMDs from your employer-owned plan so long as you don’t own more than 5 percent of the company.
So, what about those who turned 70 ½ in 2019? If you’ve just turned 70 ½, you might be wondering whether you still need to take your RMD, in light of the new law. Yes, if you have yet to take your RMD for 2019, you must do so by April 1, 2020. Otherwise you can face a 50 percent tax penalty on the amount that you should have withdrawn.
Your second RMD will be due by December 31, 2020.
Changes to retirement planning can feel a bit confusing. If you’re feeling uncertain of where you stand in light of the SECURE Act, don’t hesitate to call us and we’ll be happy to clarify things for you.