An Unkind Act by Adam M. Grossman | December 29, 2019
AS IF ON CUE, Ebenezer Scrooge recently showed up in Washington, DC. The result wasn’t pretty. A bill known as the SECURE Act, a favorite of the insurance industry, had been stuck in Congress all year.
But suddenly, on Dec. 20, it got tacked onto another bill and signed into law. As far as I can tell, the primary beneficiaries of this new law, which heavily impacts retirement plans, will be the IRS and the insurance industry—but probably not you. It’s the holiday season, though, so I’ll start with the few positive aspects of the law.
The biggest benefit is a change to the rule governing required minimum distributions (RMDs) from retirement accounts. Under current law, if you have an IRA, 401(k) or other tax-deferred retirement account, you must begin making withdrawals in the year that you turn age 70½—or the year after, at the very latest.
Because these withdrawals are subject to income tax, and because they increase as you get older, RMDs are loathed by many retirees. Fortunately, the new rules provide some relief: 70½ has become 72. This new RMD rule is paired with another potential benefit for those in their 70s: Under 2019’s rules, even if you’re still working beyond 70½, you’re no longer permitted to make IRA contributions. This restriction has deprived many workers of a convenient savings vehicle and the associated tax deduction. The SECURE Act removes this age cap, allowing workers of any age to continue making IRA contributions.
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Source: An Unkind Act – HumbleDollar