CMP Financial Planning

The SECURE Act and Retirement Planning Changes


Husband and wife with son outside playing soccer.

The passage of the SECURE Act legislation in late December 2019 brought a few key changes that may impact your retirement planning. Several notable provisions included: 

1. Stretch your IRA with the SECURE Act

The biggest change with the SECURE Act involves the time period during which the non-spouse beneficiary can “stretch” an inherited Individual Retirement Account (IRA). The old rule was that these non-spouse beneficiaries could stretch IRA distributions over their life expectancy. The new rule requires that, starting January 1, 2020, new beneficiaries must liquidate their inherited IRAs in 10 years. Depending on the age of the beneficiary, this could significantly shorten the length of time needed to liquidate that account.

2. When you can take distributions

The second biggest change with the SECURE Act involves when retirees are required to start taking their required minimum distributions or RMDs. Starting January 1, 2020, new retirees are required start taking their RMDs at age 72 (the old rule was age 70 1⁄2), giving people the option of taking distributions 1.5 years later. As in the old law, the first distribution can be taken as late as April 1st the year following their 72nd birthday, but that year’s distribution must be taken by the end of the year as well. So effectively, two distributions are taken in the second year.

3. IRA contribution age limit change with the SECURE Act

For those earning wages into their 70s, the 701⁄2 contribution age limit was removed for IRAs!

4. Education expenses for 529 plans

The definition of qualified education expenses for 529 plans was expanded and includes an aggregate lifetime limit of $10,000 in qualified student loan repayments per 529 plan beneficiary Importantly, the new tax law does not impact when folks can start taking qualified charitable distributions –that age remains at age 701/2.