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This week, the SECURE Act passed and will bring changes to how you plan for your heirs and for your retirement. The new law takes effect January 1, 2020.
This article provides a good summary of the changes included in the SECURE Act.
Here is a quick outline of those changes:
- The required minimum distribution (RMD) age increased to 72 years old instead of 70.5 years old. Note: If you turn 70.5 in 2019, you still need to take your RMD this year.
- There is no maximum age for traditional IRA contributions.
- Unless the beneficiary falls into an exception, the beneficiary will no longer be able to stretch inherited IRAs. Under the new rule, the beneficiary of the IRA must withdraw all of the inherited funds within 10 years of the IRA holder’s date of death. There are exceptions for surviving spouses, disabled heirs, and chronically ill heirs.
- A shift for 401k annuity plans – insurance companies (rather than the employer) will now be responsible for ensuring the annuity is the appropriate product for the employee.
- The Act offers new incentives for small businesses to offer retirement plans to their employees.
These changes, especially the changes to the RMD age and the elimination of stretch IRAs may require changes to your retirement planning and estate planning. It is important that you meet with a financial advisor and an estate planning attorney to review any changes that may be necessary in light of these new tax rules.