Understanding the SECURE Act

If you’re anything like us, February is the time of year when a typical Pacific Northwest winter seems never-ending. Not only that, but taxes need to be filed soon, and in case you missed it, Congress passed a major law in late 2019 that mandated significant changes in how Americans save for retirement. The SECURE Act, which stands for “Setting Every Community Up for Retirement Enhancement,” went into effect on Jan. 1, 2020. While we all await that summer sun, hopefully, we can illuminate your retirement outlook just a little bit with a rundown of the SECURE Act.

How does the new law affect you? Let’s take a look at the highlights:

Increased Age of Required Minimum Distributions (RMDs)

Previously, qualified account holders (IRAs, 401(k), etc.) had to withdraw required minimum distributions (RMD) in the year they turned age 70 ½. For individuals that didn’t turn 70 ½ prior to 12/31/2019, the SECURE Act increased that age to age 72.

Increased Maximum Age for Traditional IRA Contributions

Previously, the maximum age at which a person could contribute to a traditional IRA was 70 ½. The SECURE Act now allows contributions beyond 70 ½.

No More Stretch IRAs

Previously, if you inherited an IRA from a non-spouse, you were often permitted to withdraw the RMDs over the span of your life, which could sometimes be decades. The SECURE Act now requires a beneficiary to withdraw all assets from an inherited IRA within 10 years.

Qualified Charitable Distribution Rule Change

Previously, after reaching 70 ½, you could make a qualified charitable distribution of up to $100,000 per year directly from your IRA. Now, you may still use your IRA for a qualified charitable distribution after turning 70 ½, but you must also wait until age 72 to specifically use your RMD amount towards a qualified charitable distribution.

While these changes aren’t likely to significantly effect your retirement planning, it may be helpful to review financial and estate plans to see how you may be impacted. As with all things tax-related, the devil is in the details. If you have questions about how you might specifically be impacted, feel free to reach out to us to discuss. As more guidance on the new law becomes available, we will provide you updates.

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.   Investments involve risk and, unless otherwise stated, are not guaranteed.  Multnomah Group does not provide legal or tax advice. Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.

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