As part of the budget process, there are important changes coming to retirement accounts as the SECURE Act will pass Congress and be signed into law between now and the end of the year.
This law promises relatively big changes We have been following this law for quite a while and will be updating our clients with a blog post about the earliest version of the law in 2018 when Mitch DeWitt analyzed how (then known as) RESA might affect retirement savings. This summer when the first versions of the bill were making the rounds we discussed what was renamed the SECURE Act and how the changes might change retirement and Estate planning for individuals and families. The proposed legislation, as we noted in those articles will make a couple of changes:
Required Minimum Distributions (RMDs) would be delayed from age 70.5 until age 72 in Individual Retirement Accounts and 401(k)s. Meaning those who’ve contributed to these plans would be able to defer taking money out for an additional 1.5 years.
In order to pay for the decreased revenues, the treatment of IRAs and 401(k)s inherited by individuals other than the spouse would be changed. Rather than being allowed to “stretch” withdrawals from an IRA across the inheritor’s full lifespan, under the current terms of the legislation, such withdrawals would be limited to a 10 year time frame.
There would no longer be an age cap (currently 70.5) on the ability to contribute to an Individual Retirement Account (IRA) or 401(k).
Between now and the end of the year, the specifics of the bill will be subject to some horse trading between parties and the two houses of congress before it is enacted. Several details remain to be determined-- including whether it will go into immediate effect (in 2020) or if there will be delays.
However, we’re preparing articles and a comprehensive podcast to discuss the specifics of how these various pieces will work. Moreover, we’ll be raising this issue directly with our clients who are immediately affected in the New Year.Keith Poniewaz