HOW MIGHT THE RECENTLY PASSED SECURE ACT AFFECT YOUR IRA?

A piece of legislation passed into law in December 2019 has changed the landscape for IRA accounts. The “Setting Every Community Up For Retirement Enhancement” (SECURE) Act is complex web of new rules and updates to old rules pertaining to retirement accounts. If you own an IRA, we wanted to make you aware of some of the recent changes:

  • Required Minimum Distribution (RMD) age now pushed out to age 72
    • If you have already started RMDs under the previous 70 ½ rule, then you must continue.
    • If you turn 70 ½ in 2020, you can defer your RMD start until you’re 72
    • PLEASE NOTE: Congress recently passed the CARES Act (Coronavirus Aid Relief and Economic Security Act), which permits individuals to forgo taking their 2020 RMD if they have been impacted by COVID-19. This option is open to individuals who have already begun taking RMDs, those who would have begun in 2020, and those who have extended their first RMD from 2019 into the first quarter of 2020. Please contact us if you have questions, or if you would like to postpone your RMD until 2021. 
  • IRA contributions: previously, IRA contributions were not allowed after an individual reached age 70 ½ . Under the SECURE Act, an IRA owner can contribute at any age, if he or she has earned income.
    • Please note that you cannot contribute for 2019 if you were age 70 ½ or older as of Dec. 31, 2019.
  • Qualified Charitable Distributions (QCD) amounts:
    • After reaching age 70 1/2, you can make qualified charitable contributions of up to $100,000 per year directly from your IRA.
    • Deductible IRA contributions made for the year you reach age 70 1/2 and later years can reduce your annual QCD allowance.
  • We would encourage you to review the beneficiary arrangements on your IRAs:
    • If someone other than your spouse is your beneficiary, he/she will have to fully distribute the IRA money within 10 years. Unless your beneficiary is:
      • your minor child
      • a disabled individual
      • a chronically ill individual
      • an individual who is not more than 10 years younger than you
    • Thankfully, the new 10-Year Rule offers some flexibility around the timing of distributions. Funds can be withdrawn in any amount, at any time over the course of the 10-year term – as long as the entire amount is withdrawn by the end of the 10th year.
    • All the funds withdrawn are taxable to the beneficiary as income.
  • If you are currently taking required distributions from inherited money, according to your life expectancy, you may continue to do so. This change is only effective for beneficiaries of IRA owners who pass away in 2020 and beyond.

Please note that additional clarity on some of the details of the SECURE Act is forthcoming from the Federal government.

Your GuideStream Financial advisor would be glad to review your unique situation with you and answer any additional questions you may have. GuideStream Financial does not offer tax and/or legal advice, so it may be advisable to contact your CPA and your estate-planning attorney if you have one.

As always, please contact us with additional questions, concerns, of if you need to make changes to your account.

Please remember to contact GuideStream Financial, Inc. (“GuideStream Financial”), in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that GuideStream Financial  effect any specific transactions for your account.  A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request.

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