Just in Time for the New Year, A Boost for Retirement Savings

The year-end appropriation bill that was passed by the House in the summer was passed by the Senate last week and quickly signed by President Trump. Within the bill was the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), which will go into effect on January 1, 2020, is being heralded as the biggest retirement savings law in the past 10 years.

One major change is there is now no age limit to making contributions to a traditional IRA, as long as the person is not fully retired. The maximum amounts a person can contribute still remain the same, meaning that individuals under 50 in 202o can contribute $6,000 and those over 50 can contribute $6,000.

The age at which a person must make required minimum deductions (RMD) has been increased from 70 1/2 to 72, a nod to longevity in the country’s citizens. Also, there is no longer a 10% penalty for making an early withdrawal in the event of a birth or adoption.

Another notable change is that “stretch” IRAs are essentially a thing of the past, except when spouses inherit an IRA. Generally, all funds in an IRA you pass down as an inheritance will have to be distributed to beneficiaries within 10 years of your death, along with the resulting tax burden. Spouses are still excluded from this requirement and still have the option of stretching distributions over their remaining life expectancies. 

See Bryan Kirk, Just in Time for the New Year, A Boost for Retirement Savings, Fiduciary Trust, December 23, 2019.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.