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What to Know: SECURE Act Changes to IRA Accounts

Tags: Saving

If you have an IRA account, recent changes have taken effect as of January 1st, thanks to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. This act was approved at the end of the year, so many financial institutions are currently awaiting updated guidance from regulators. However, PyraMax Bank would like to make you aware of the following changes that have taken place:

Required Minimum Distributions Beginning at Age 72

The SECURE Act of 2019 changes the age at which Traditional, SEP and SIMPLE IRA owners must begin taking required minimum distributions (RMDs).  If you were born before July 1, 1949, you must begin required minimum distributions by no later than April 1 following the year in which youattain age 70½. Accordingly, Traditional, SEP and SIMPLE IRA owners who attained age 70½ during 2019 must take their first required minimum distribution by no later than April 1, 2020. Individuals born after June 30, 1949, must begin taking required minimum distributions at age 72. For these individuals, the deadline for taking the first required distribution is April 1 of the year following the year in which they turn age 72.

Traditional IRA Funding—Age 70½ Restriction

The SECURE Act of 2019 eliminates the 70½ age restriction for funding a Traditional IRA. For 2020 and later years, individuals who have earned income from working may continue to fund their IRA beyond age 70½. While this change takes effect on January 1, 2020, the new rule DOES NOT apply to carryback.contributions made for the 2019 tax year (i.e., individuals who are age 70½ or older during 2019 cannot make a Traditional IRA contribution for the 2019 tax year).

Penalty-Free IRA Withdrawals for Certain Births/Adoptions

While taxable IRA withdrawals taken prior to age 59½ are typically subject to the IRS early withdrawal penalty, certain exceptions exist. Beginning January 1, 2020, a new penalty exception allows certain qualifying individuals to withdraw up to $5,000 from an IRA (or other tax-qualified savings plan) before age 59½ in the case of a qualifying birth or qualifying adoption.

Accelerated Withdrawals for IRA Beneficiaries

Effective for deaths occurring on or after January 1, 2020, the SECURE Act of 2019 changes the withdrawal options for many non-spouse IRA beneficiaries. Under the SECURE Act of 2019, non-spouse beneficiaries of IRA owners who pass away on or after January 1, 2020, must generally withdraw all inherited IRA assets by December 31st of the year containing the tenth anniversary of the IRA owner’s death.

Exceptions for non-spouse beneficiaries include:

  • Children
  • Disabled Individuals
  • Chronically Ill Individuals
  • Beneficiaries who are not more than 10 years younger than the IRA Owner

5-Year Withdrawal Period for Some Non-Person Beneficiaries

While the SECURE Act of 2019 requires that most non-spouse beneficiaries (i.e., estates, charities, etc.) withdraw all assets from an inherited IRA within 10 years of the death of the IRA owner, non-person beneficiaries, under certain circumstances, must withdraw IRA assets from a deceased IRA owner’s IRA within 5 years following the death of an IRA owner.

While many of these changes can be beneficial to your IRA account, knowing the rules that affect your financial assets is vital. If you have questions regarding changes implemented due to the SECURE Act, please contact your tax advisor or financial planner.



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