Get in touch
555-555-5555
mymail@mailservice.com
Recent Law Changes
Affecting IRAs
Recent Law Changes
Affecting IRAs
On December 20, 2019, the SECURE (Setting Every Community Up for Retirement Enhancement) Act was signed into law effective January 1, 2020, and was put in place to strengthen retirement security across the country.
The Act includes many changes that have a direct impact on your funds, both currently and for your beneficiaries. Below are some of the changes we feel impact our members the most.
The Act includes many changes that have a direct impact on your funds, both currently and for your beneficiaries. Below are some of the changes we feel impact our members the most.
Major Changes for You:
- The Required Minimum Distribution (RMD) age increased from 70½ to 72. This means if you are not currently receiving your RMD, you aren’t required to take your first distribution until age 72. GBU will provide more information as you reach the RMD age. If you are currently receiving your RMD, the age change does not apply to you.
- There is no age limit on earned income IRA contributions. This means if you are still earning income, you can contribute up to the maximum limits in each tax year.
- The addition of a penalty-free distribution from an IRA with the birth of a child or adoption. This means if you are under 59½, you are eligible for up to $5,000 in penalty-free distributions within one year of the event.
Major Changes for Beneficiaries:
There have also been significant changes to IRA payout at death for beneficiaries.
Previously, beneficiaries of an IRA were able to establish a “Stretch” Beneficiary IRA. This allowed beneficiaries to open an IRA in their own name and take a yearly RMD to spread the taxable consequences over the lifetime of the annuity. Starting with deaths after 2019, a designated beneficiary is placed into three categories: Eligible, Non-Eligible, and Non-Natural Persons.
- An Eligible Designated Beneficiary is a spouse, disabled person, chronically ill person, a minor until age of majority, and a non-spouse beneficiary who is not more than 10 years younger (year of death attained age). Those who fall in this category are able to open a “Stretch” Beneficiary IRA and receive a yearly RMD based on their age. A spouse may still do a continuation or transfer of funds.
- A Non-Eligible Designated Beneficiary is someone who is not specified in the Eligible Designated Beneficiary category above. Those who fall in this category no longer have the option of a “Stretch” Beneficiary IRA; instead, the funds will be placed in a 10-year holding account. By the end of the 10th year from the decedent’s date of death, all funds must be withdrawn from the account. Funds are taxed to the beneficiary in the year they are withdrawn.
- A Non-Natural Person, such as an estate, trust or charity does not fall under the 10-year holding account. All funds paid to any Non-Natural Person must be withdrawn within 5 years of death.
We encourage you to do additional research on the new SECURE Act as there may be changes we have not covered. If you have questions in regards to tax implications for yourself or your beneficiaries, please speak with your tax advisor or accountant. Rest assured our Home Office team and our GBU producers are ready to answer any questions you might have. You may reach us at 800-765-4428 or info@gbu.org. When communicating with us, please reference the SECURE Act.