Congress passed new tax legislation around the holidays this past year. Called the SECURE Act, it stands for Setting Every Community Up for Retirement Enhancement Act of 2019. We have summarized a few of the more relevant changes you might need to know.
Required Minimum Distribution Relief for Retirement Plans
Before the SECURE Act, if you had money in a traditional Individual Retirement Account (IRA) or an employer-sponsored retirement plan and were retired, you were required by law to start making withdrawals at age 70 ½. But for people who haven’t hit 70 ½ by the end of 2019, the SECURE Act pushes out the RMD start date for most situations until age 72. This change applies to RMD’s after December 31, 2019, if you turn 70 1/2 after that date.
Increased Savings Opportunities
The SECURE Act also increased retirement savings opportunities in a number of ways. Before this law, you couldn’t contribute to a tax-deductible IRA after 70 ½. But with the SECURE Act, you can. So, if you plan on working into your 70s, you can still put money into a deductible IRA. Those over 70 ½ in 2019 won’t be able to save in an IRA for this year. This law change means a couple over 70 ½ will be allowed to save to an IRA over $14,000 in 2020 if both spouses are contributing the maximum of $7,000 a year. This can help them receive a valuable tax deduction and save for the future.