The U.S. Congress signed a $1.4 trillion year-end spending bill on December 20, 2019.  Neatly tucked away inside this new spending law is the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which became effective January 1, 2020.

The SECURE Act may require a re-evaluation of your current retirement and estate plans. Therefore, it is important to evaluate how the new rules apply to your particular situation; you may have some new opportunities to make IRA contributions or you may be able to delay taking RMDs a little bit longer. You will certainly want to give serious consideration to how the elimination of the “Stretch IRA” will impact you estate planning goals and objectives.

This new act includes significant changes to retirement accounts; the following is only a partial list for your consideration.

Age Limit Eliminated for Traditional IRA Contributions.

Beginning in 2020, the SECURE Act eliminates the age limit for traditional IRA contributions (formerly 70 ½).[1] Now, those of you who are still working can continue to contribute to a traditional IRA, regardless of your age.  Traditional IRA contributions are not limited by annual income.  However, Roth IRA contribution limits and eligibility are based on your modified adjusted gross income (MAGI), depending on tax-filing status. Partial contributions are allowed for certain income ranges. In 2020 the total annual contributions to your traditional and Roth IRAs combined cannot exceed $6,000 (under age 50) and $7,000 (age 50 or older)

RMD Age Raised to 72.

The SECURE Act also raises the age for beginning required minimum distributions (RMDs) to 72 for all retirement accounts subject to RMDs.  The new rule is good news for IRA owners reaching age 70 ½ in 2020  who do not have to take their first RMD in 2020 now that the RMD deadline has been extended to age 72.

“Good Bye, Stretch IRA”

Beginning for deaths after December 31, 2019, the stretch IRA for inherited retirement accounts is replaced with a ten year rule for the vast majority of beneficiaries.[2] The rule requires accounts to be emptied by the end of the tenth year following the year of death. There are no annual RMDs. Instead, the only RMD on an inherited IRA is the balance at the end of the 10 years after death. For deaths in 2019 or prior years, the old rules remain in place.

There are five classes of “eligible designated beneficiaries” who are exempt from the 10-year post-death payout rule and can still “stretch” RMDs over life expectancy. These include surviving spouses, minor children, disabled individuals, the chronically ill, and beneficiaries not more than ten years younger than the IRA owner.

New Exception to the 10% Penalty for Birth or Adoption.

The SECURE Act adds a new 10% penalty exception for birth or adoption, but the distribution is still subject to tax. It is limited to $5,000 over a lifetime. The birth or adoption distribution amount can be repaid at any future time and re-contributed back to any retirement account.

Employer Liability Protection for Annuities in Plans.

The SECURE Act provides a safe harbor for employer liability protection for offering annuities in an employer plan. This is expected to open the door for more annuity products to be available as investment choices in employer plans.

QCD remains 70 ½

Moving the RMD age to age 72 does not change the qualified charitable distribution (QCD) rule. Therefore, a taxpayer who is 70½ in 2020 may make a QCD and reduce his or her RMD (subject, however to the complex “coordination with QCD”)[3].

If you have questions…

The above information is provided with the goal of 1) introducing SWP clients to some of the most important parts of the SECURE Act and 2) to show how the SECURE Act may affect, and possibly change, your retirement and estate planning objectives.

Our Advisers are available to answer any questions you may have regarding the SECURE Act as it pertains to your individual and unique financial situation.  Please let us know if you have any questions.



[1]  The new rule eliminating the age limit for traditional IRA contributions is effective January 1, 2020. Prior year contributions for 2019 would be subject to the old rules, including the age limit. The bad news is that a 2019 contribution would not be allowed. The good news is that for 2020 and later years, the age limit is gone.

[2] Under the SECURE Act, there are no required minimum distributions for inherited IRAs (known as the “stretch IRA”). With the new law, beneficiaries need only ensure all of the money is taken out within 10 years. These rules also apply to inherited 401(k) accounts, regardless of whether they are rolled into IRAs, as well as Roth IRAs. The new rule takes effect on Jan. 1, 2020, which means current beneficiaries already taking required minimum distributions from inherited accounts will NOT be affected.


[3] Because IRA contributions are now deductible for those who qualify for the qualified charitable distribution (QCD) provision, SECURE reduces the allowable QCD by the IRA deduction allowed for a taxpayer over 70½. This is a complex part of the SECURE Act and requires special planning.