SECURE Act Frequently Asked Questions
In late December 2019, Congress passed legislation to make it easier for people to save for retirement. It’s called the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Here are some general questions about this new law.
How does the SECURE Act affect required minimum distributions (RMDs)?
Effective Jan. 1, 2020, the SECURE Act changed the age when people must begin withdrawing required minimum distributions (RMDs) from their retirement savings accounts from 70½ to 72. For anyone who turns 70½ on or after Jan. 1, 2020, the new age of 72 applies. But if you turned 70½ on or before Dec. 31, 2019, the previous RMD start age still applies.
- If your Date of Birth is March 15, 1949, you would turn 70 ½ in 2019 and the previous start age of 70 ½ applies.
- If your Date of Birth is April 17, 1950, you would turn 70 ½ in 2020 and the new start age of 72 applies.
I participate in a governmental 457(b) plan. Did the minimum age change for starting withdrawals?
Yes. Effective Jan. 1, 2020, the age at which you can begin receiving in-service distributions from a governmental 457(b) plan decreased from 70½ to 59½.
When can I start withdrawing funds from a defined benefit pension plan?
The SECURE Act also decreased the age at which you can begin receiving in-service distributions from a defined benefit pension plan from 62 to 59½ as of Jan. 1, 2020.
What if I inherit the funds from a retirement plan?
In general, if you inherit an IRA or 401(k) from anyone other than your spouse, you must withdraw the entire balance within 10 years of the contract owner’s death. You may have more time to access the funds if you are disabled or chronically ill; a child who has not reached the age of majority; or are not more than 10 years younger than the IRA holder or plan participant. In addition, trusts are subject to different rules and may be required to receive the entire balance within 5 years. Consult a financial professional or tax expert with questions about your specific situation.
Is there still an age limit for contributing to traditional IRAs?
Not anymore. The law removes the age limit for contributing to a traditional IRA. Prior to 2020, individuals could not contribute to a traditional IRA if they were 70½ or older. Now there is no age limit as long as the person is still working and has earned income.
Can I withdraw funds from my retirement account before I turn 59½ for costs associated with a birth or adoption?
Effective Jan. 1, 2020, individuals may withdraw up to $5,000 from their retirement account to cover qualified costs associated with a birth or adoption. Those distributions are no longer subject to the IRS 10% early withdrawal penalty. There are some restrictions to this provision, and other early withdrawals may still be subject to penalties, so be sure to consult with a financial professional or tax expert if you have questions.