The Secure Every Community Up for Retirement Enhancement (SECURE) Act was passed in December 2019. It includes reforms to increase access to plans in the workplace and expand retirement savings. This legislation includes changes that can affect defined contribution plans, defined benefit plans, individual retirement accounts and 529 plans.
The Secure Act went in to effect on January 1, 2020. It changed the Required Minimum Distribution (RMD) requirements for inherited accounts and increased the age that you are required to start taking your RMD. Due to people working longer, Congress decided to push out when required minimum distributions begin. For someone who has not already reached age 70.5 by the end of 2019, the new required minimum distribution age will be 72.
If you will leave behind or inherit a retirement account, the required minimum distributions on those accounts will be 10 years. However, if anyone inherited an IRA from the original account owner that passed away prior to January 1, 2020, they can still continue their current distribution schedule. The new 10-year rule means that you might have to adjust how much you withdraw annually as compared to previous years. It could also be worth understanding these changes when you are doing estate or retirement planning since the IRA and 401(k) rules have changed significantly.
If you would like to calculate your own inherited account (or hypothetical situation), you can use this calculator at SecureRMD.com
See example below for an account with a value of $100,000 as of December 31, 2019. The person who inherited this account is 50 years old and expects a 3% rate of return on the account.
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