What the SECURE Act Means to You, 0420 RIBJ, RIBJ, 68 RI Bar J., No. 5, Pg. 17

AuthorMarc J. Soss, Esq.
PositionVol. 68 5 Pg. 17

What the SECURE Act Means to You

Vol. 68 No. 5 Pg. 17

Rhode Island Bar Journal

April, 2020

March, 2020

Marc J. Soss, Esq.

Retirement planning is poised for the first major piece of retirement legislation in a decade. After the Setting Every Community Up for Retirement Enhancement ("SECURE Act") was approved by the Senate by a vote of 71 to 23, and the House by a vote of 297 to 120, President Trump signed it into law on December 20, 2019, as a part of spending and tax-extension bills. The SECURE Act creates sweeping changes that immediately affect retirees and savers alike.

IRA CONTRIBUTIONS & DISTRIBUTIONS

Extended Contribution Age for those Working

Dating back to 1960s concepts, prior law prohibited contributions to a traditional IRA account for those that had reached age 70½, even if still working. This created a dilemma as life expectancies increased and individuals worked later in life to fund longer retirements. The SECURE Act now permits individuals to continue contributing to an IRA, so long as they continue working.

Required Minimum Distributions

Beginning January 1, 2020, the age at which an individual will be required to begin making withdrawals from their traditional retirement account will increase from age 70½ to 72. This change will primarily benefit retirees who don't need the funds and have not already reached age 70½. Those who are currently 70½ or older must continue withdrawing their required minimum distributions under current rules. However, those who reach age 70½ on or after January 1, 2020 are subject to the new rules and will have an extra year and a half before they need to start making mandatory withdrawals.

Stretch IRA

The SECURE Act effectively removes the Stretch IRA concept as an estate planning tool. A surviving spouse may continue to withdraw the inherited IRA account over their life expectancy, even if the funds are received through a conduit trust. However, with limited exceptions, other beneficiaries will be required to draw down the account over a ten (10) year period. The funds may be withdrawn incrementally over the ten (10) year period, or all in one (1) or more years (including everything in year ten (10)).

The ten (10) year rule will be suspended for a disabled or chronically ill (certification required) individual until the disability or illness ceases or they pass away. If the beneficiary has not reached the age of majority...

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