11/10/2020

On December 20, 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law, making numerous changes to retirement laws.

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RMD's

The SECURE Act pushes the required minimum distribution (RMD) age from 70½ to 72, for those taxpayers who turn 70½ in 2020 or later. These taxpayers will not be required to withdraw their first RMD until they are 72.

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Contributions

Contributions to traditional IRAs no longer have an age restriction. Under the old rules, taxpayers 70½ or older with earned income could no longer make contributions to a traditional IRA. The requirement to have earned income has not changed. Roth IRAs continue to have no age limit, and neither IRA type has a minimum age.

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​Penalty-free Distributions for Birth or Adoption

Taxpayers may withdraw up to $5,000 from their 401(k), IRA or other retirement account for the birth or adoption of a child (under the age of 18 or physically or mentally incapable of self-support). The distribution will be taxable, but it will not be subject to the 10% early withdrawal penalty. If the taxpayer is married, both spouses can withdraw $5,000 from their own account for a total of $10,000 penalty free.

The taxpayer has one year from the date of the child’s birth or on which the adoption is finalized to withdraw the funds. The money can be redeposited later and will be treated as a direct trustee-to-trustee rollover.