On December 20th, 2019, President Trump enacted the Setting Every Community Up for Retirement (“SECURE”) Act. Effective January 1, 2020, the SECURE Act, among other things, changed the age at which you are required to start taking your required minimum distribution (“RMD”) from your individual retirement accounts (“IRAs”).
Prior to the SECURE Act, and subject to certain circumstances, you were required to start taking your RMD by April 1 after the year you turned 70 ½. Because people are living longer and need to manage their assets for a longer life span, the SECURE Act increased the RMD age to 72. If, however, you reached 70 ½ by the end of 2019, the change in age does not apply to you.
The other changes under the SECURE Act are too voluminous to discuss here. Yet, it is worth mentioning that the rules pertaining to beneficiaries of IRAs changed as well. While the changes affect many, young families seem to be affected more than others. Under the SECURE Act, those who inherit an IRA (known as beneficiaries) must withdraw the totality of the inherited IRA no later than the 10th year after the death of the original owner of the IRA. Prior law allowed you to create a trust for the benefit of a child and, if the trust was prepared accordingly, the child could withdraw the balance of the IRA over his or her lifetime. Now, once the child reaches the age of majority, the ten-year period starts.