As of January 1st, 2020, many changes from the SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019 became effective. Some of the more notable changes that could impact your financial future involve the following:

Some of the major changes include:

1) Required minimum distributions (RMDs) Start at 72, not 70-and-a-half

2) Traditional IRA Contributions are allowed after 70-and-a-half

3) changes to the rules on inherited retirement accounts

4) new allowence for adoption / birth expenses

5) changes in 529 plans

RMDs starting at 72: The new law only applies to the people who turn 70-and-a-half  after December 31st, 2019. So, if someone turned 70-and-a-half  in 2019, the person must take their RMD in 2019 and beyond.

Traditional IRA contributions after 70-and-a-half:  The law puts an end to the restrictions on individuals contributing to an individual retirement account (IRA) after 70-and-a-half. If individuals have earned income, they may continue the contributions.

Inherited retirement accounts: Inherited retirement accounts, sometimes known as “Stretch IRAs”, can be used to distribute assets over the beneficiary’s lifetime. Due to the recent changes, those assets must be distributed within ten years of inheritance. There are still exceptions for spouses, minor children, disabled individuals and those less than ten years younger than the decedent. This change will only impact accounts inherited starting in 2020, not existing inherited accounts.

Adoption / birth expenses: The new law allows for new parents to withdraw up to $5,000 from an IRA or employer sponsored plan penalty-free. These withdrawals can be used to pay for related expenses through the first year after birth or adoption. Taxes will still be paid on the pre-tax contributions, but no penalties will apply to the withdrawals.  

Expanding 529 plan savings: Recent changes expand what a 529 savings plan can cover. These plans can now cover homeschooling, private elementary, secondary or religious schools. It also allows individuals can now use assets in college-saving plans to repay up to $10,000 in qualified student loans.

What are the next steps you should take?

  • Individuals who turned 70-and-a-half prior to December 31st, 2019 will continue to take their required minimum distributions as they have been.
  • Individuals who have estate plans that include leaving retirement accounts to their successors should consider reviewing those plans and have a conversation with a financial planner, tax adviser, and attorney to determine whether any changes would be suitable.
  • Individuals who are older than 70-and-a-half with earned income should meet with a tax adviser and financial planner to decide whether traditional IRA contributions would be beneficial for their financial situation.

Offered for informational purposes only, not as specific advice to any individual. 

Author Profile

Woody Derricks, CFP®
Woody Derricks, CFP®
Throughout my nearly 20 years as a Financial Advisor, I have seen some of the best and worst markets in our history. That experience allows me to approach my clients with the knowledge of how the markets fit into their greater financial picture. At Partnership Wealth Management we help everyday people who have accumulated wealth make sense of what they have and work with them to maximize their financial opportunities in a relaxed, comfortable, and professional environment. While we help people from all walks of life, many of our clients are same-sex couples searching for a knowledgeable, LGBT-friendly financial advisor to help them with their unique financial planning needs. I am a CERTIFIED FINANCIAL PLANNER™ professional and have the Accredited Domestic Partnership Advisor(sm) designation. As a Registered Investment Advisor, we are not tied to any company’s investment products allowing us to provide unbiased advice by offering a wide array of investments and other products to our clients. Since 2001, I have been writing articles on financial planning for several regional newspapers and have been a guest speaker on LGBT financial issues for various local and national organizations. Additionally, I have conducted financial planning workshops for large corporations and government agencies. Non-Profit Work I believe that it is important to give back to the community and currently serve as the treasurer for FreeState Justice and as a co-founder/president of Paws for a Cause. I’m a current member of several LBGT, environmental, and local community groups. Personal My wife, Heidi and I enjoy camping, hiking, and traveling with our daughter, Elise, and our dogs, Fenway & Roxy. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.