New RMD rules under The Secure Act
Updated: Aug 4, 2020
When The SECURE Act became law in December of 2019, the biggest change affecting retirees or those nearing retirement is the age at which Required Minimum Distributions (RMDs) begin. The age was changed from 70 ½ to 72 for individuals who, as of December 31st 2019, have not yet turned 70 ½.
For a quick refresher, RMDs are annual distributions the IRS forces individuals over the age of 72 (previously 70 ½) to take. These distributions are generally from tax-favored retirement accounts that have not previously been taxed such as 401k, 403b, Traditional IRA, and other IRA-based plans (not Roth IRAs). It is a way for the IRS to collect taxes on monies that have previously not been taxed. The distributions are treated and taxed as ordinary income.
As is normal with many new law changes, there has been a bit of confusion and many questions regarding this change.
To better understand when an RMD begins, everyone falls into one of two categories:
Individuals who, as of December 31st, 2019, have not yet turned 70 ½. If this is the case, your RMD age has been pushed back to the year in which you turn 72.
Individuals who, as of December 31st, 2019, are 70 ½ or older. If this is the case, you have been or were supposed to start taking an RMD in 2019 and there will be no changes. The new law will not affect your RMDs and they will continue as is.
With over 75% of Americans under the age of 70 and an aging population, this change will alter future strategies for millions of Americans.
Please contact me for more information, strategies, or specifically how this change may affect you.
Evan Werckenthien, CFP©
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. E.W. Wealth Management and Cambridge are not affiliated. The information in this email is confidential and is intended solely for the addressee. If you are not the intended addressee and have received this email in error, please reply to the sender to inform them of this fact. We cannot accept trade orders through email. Important letters, email, or fax messages should be confirmed by calling 317-587-0858. This email service may not be monitored every day, or after normal business hours. Cambridge does not provide tax advice.
Source: Experian, Federal Reserve