At the end of 2019, the Secure Act was passed, and with it came many new rules to navigate in regards to retirement accounts, like IRAs. Over the next 4 weeks, I am going to unpack 4 areas that I think are most important to pay attention to.
First up, is the change to the required minimum distribution (RMD) age. The RMD is the minimum amount that the IRS requires individuals to take from their retirement accounts each year. They do this because these distributions are taxable so they are able to finally collect revenue on deferred income. Prior to the Secure Act passing, the age when RMDs started was 70 ½ (specifically, by April 1st of the year following turning 70 ½). For retirees who are not dependent on the income, this is an added tax relief since they will be able to defer distributions potentially an extra 2 years. In addition, the math becomes simpler since you don’t have to figure out when your half birthday is!
If you turned 70 ½ in 2019 or before, you continue RMDs under the old rule. For anyone who did not, the age to start will now be 72.
One additional benefit is that qualified charitable distributions (QCDs) remain at age 70 ½ despite the RMD being pushed back, creating a unique tax planning opportunity. More on that next week!
Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified investment, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing.