Somewhere in Washington D.C. is a government agency devoted to brainstorming creative acronyms for lawmakers to slap on bills for easy reference and slick marketing. Case-in-point: the “Setting Every Community Up for Retirement Enhancement Act” or “SECURE Act”. Enacted on December 20, 2019, the SECURE Act did a whole lot that had very little to do with retirement. However, there were some important changes to IRA rules that bear mentioning:  

1. The minimum distribution age was increased from 70½ to 72, allowing investors additional tax deferred growth on their traditional IRA investments. This change only applies to those reaching 70½ after July 1, 2019. If you reached that age before July 1, 2019, you are still required to begin your minimum distributions in 2020.  

 2. Similarly, investors can now contribute to a traditional IRA after they turn 70½, assuming you have taxable income in the year of contribution. Previously, contributions to traditional IRAs were prohibited in those years.  

3. The Stretch IRA wasn’t killed, but it was wounded. Previously, a non-spouse beneficiary on a traditional IRA was required to take minimum distributions immediately upon receipt of the account, but could stretch those payments out over the beneficiary’s own expected life-span (hence, the “Stretch IRA”). A young beneficiary, then, could elect to take much smaller annual distributions, and defer taxes on the bulk of the account balance for decades. Now, beneficiaries on an IRA account that passes by a death occurring after January 1, 2020 must distribute the entire account balance within 10 years. For many beneficiaries, this will mean higher income and taxes over a shorter period of time. The same rule applies to distributions from inherited 401(k) accounts and other defined contribution plans. As noted, the rules do not apply to spouses, to disabled individuals and individuals not more than 10 years younger than the decedent. 

As I mentioned, the SECURE Act accomplished much more, including changes to rules about borrowing from retirement accounts, withdrawing from those accounts to cover certain birth and adoption expenses, and how distributions from 529 plans are taxed. To be sure whether or how these changes affect you and your retirement, be sure to discuss them with an attorney or your financial planner.