This past December, the US Senate approved a $1.4 billion dollar spending deal that includes the Setting Every Community Up for Retirement Enhancement (SECURE) Act, conceived to assist Americans better plan and save for retirement. The Act brings some of the most significant changes to retirement savings laws we have seen in quite some time. For some, the changes enacted will require a change in overall retirement planning strategy, while others may not be affected until farther down the road.
So how will the SECURE Act affect you?
Delayed Required Minimum Distribution (RMD): Until now, you were required to begin taking mandatory distributions from your non-Roth IRAs at age 70 ½. However, now you can wait until age 72 to begin drawing down your savings. This extension allows you to keep your money in a tax-deferred account for an additional 18 months before needing to take an RMD.
This is great news if you aren’t in need of your IRA income at age 70 ½ and prefer to allow your money to continue growing tax-deferred. However, this may impact how and when you claim social security benefits and/or your overall retirement tax planning strategy.
This rule only affects those individuals turning 70 ½ in 2020. If you turned 70 ½ in 2019, you are not eligible to wait until age 72 and must begin taking your RMDs on the original schedule.