5 Ways the SECURE Act Has Changed Retirement Planning

January 16, 2020

In late December the SECURE Act was passed by Congress and signed by the President. The SECURE Act immediately changed several rules related to retirement planning.

1. Required minimum distributions (RMDs) now begin in the year you turn age 72, rather than 70½. The new rule only applies if your birthdate is July 1, 1949 or later. In other words, if you turned age 70½ in 2019 the old rule will apply for you going forward, and you must continue to take RMDs even if you have not turned 72 yet.

2. Retirement accounts inherited by non-spouses starting in 2020 must be distributed within 10 years of the death of the original account owner. Distributions previously could be "stretched" over a beneficiary's lifetime based on a life expectancy calculation. Under the new rule, accounts simply must be emptied within 10 years - there are no required distributions in any given year.

3. The maximum age limit for IRA contributions has been eliminated starting with 2020 contributions. It was previously capped at age 70½.

4. A $5,000 penalty-free distribution is allowed from retirement accounts for a qualified birth or adoption. The distribution must take place within one year of the birth or adoption.

5. Qualified 529 plan distributions now include paying down student loan debt up to $10,000, over the course of the student's lifetime.

SECURE Act acronym: Setting Every Community Up for Retirement Enhancement.