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Retirement savings rules change

By John R. Berry

This year the SECURE Act became law. SECURE stands for Setting Every Community Up for Retirement Enhancement. This legislation features several changes of particular interest to our clients.

IRA contributions

IRA owners take note, as several tweaks to these accounts apply. In a likely nod to the fact that Americans are working longer and need to save more, Congress removed the age cap on non-rollover Traditional IRA contributions. Previously, a worker couldn’t contribute to one after he or she turned 70 ½. Now there’s no age limit as long as all other requirements are met, including having earned income.  Great news for those who continue to work into their seventies.

RMD age increased

Along similar lines, the required distribution age for IRA and employer-sponsored qualified accounts was increased to 72 from 70 ½. This impacts those turning 72 in 2020 and beyond, who can now—if they wish—delay government-mandated withdrawals from their retirement accounts until the April following their 72nd birthday.

Stretch IRA loses oomph

Although the law altered several other rules governing retirement accounts, the last change I will mention is that it reins in use of the Stretch IRA. Under the old regulations, a beneficiary could take required distributions of assets over their own lifetimes, rather than the lifetime of the (usually older) original account owner. A 70 year old, for example, could name her 35 year old son a beneficiary and, were she to die, he could take distributions based on his own life expectancy, greatly slowing the remittance of taxes to the Treasury. Now, there’s a 10 year rule. The son would have to take all of the money out of the account within 10 years. This hampers the use of the Stretch IRA technique as a wealth transfer tool.

The 10 year rule does not apply to a surviving spouse and certain other “eligible designated” beneficiaries including disabled and chronically ill individuals and those who aren’t more than 10 years younger than the plan participant/IRA owner, such as a sibling.

In conclusion, the SECURE Act makes modest changes designed to help workers save more for longer and, if they’re retired, hold on to those funds a few more years before having to pay taxes on them.


This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.


Davis & Harman LLP via LPL Financial