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March 2020
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The SECURE Act Provisions
Retired man at coffee shop
by Jason Vitucci, CFP® & Gene A. Schnabel

You may have read in the news about the SECURE (Setting Every Community Up for Retirement Enhancement) Act that went into effect on January 1, 2020 and wondered if it will affect your retirement accounts. This Act makes some very significant changes to required minimum distribution (RMD) rules as related to Individual Retirement Accounts (IRAs) and other retirement plans, in addition to changes in other areas.

Some of these changes may have an impact on your financial planning and other financial interests. Although there are some questions that will need to be answered in the future by the Department of the Treasury, you should be aware of the provisions that may impact you.

Required Minimum Distributions:
  • You can delay RMDs until age 72. If you became age 70-1/2 on or after January 1, 2020, you may defer required minimum distributions (RMDs) until April 1 of the year following the year you reach age 72.
  • New 10-year “stretch” window for inherited retirement accounts. Previously, the distribution period was the remaining “on paper” life expectancy of the first beneficiary. Under the new rules, a maximum 10-year stretch window applies, but with various exceptions. This means that unless an exception applies, the entire retirement account must be distributed by the end of the tenth year following the retirement account owner’s death. In such case, no annual distributions are required prior to the end the 10-year period.
  • Exceptions to 10-year stretch window. Some beneficiaries can continue to use their own life expectancy, including beneficiaries who are spouses (who also retain the right to spousal rollovers), disabled or chronically ill, or not more than 10 years younger than the decedent. For minor (as defined by state law) children of the original owner, age-based RMDs must be taken until the child reaches the age of state-defined majority, then the 10-year rule applies.
  • Multiple beneficiaries. For inherited accounts where the original owner died prior to January 1, 2020, the old rules still apply; however, if the original beneficiary dies, the successor beneficiary will be subject to the 10-year stretch rule.
  • Trusts. Conduit trusts require the RMD to be distributed fully to the beneficiaries, whereas accumulation trusts allow an accumulation of the RMD in the trust. There are specific additional exceptions for accumulation trusts if the trust benefits a disabled or chronically ill individual.
  • Qualified charitable distributions (QCDs). Tax-free distributions up to $100,000 (which may include the RMD amount) made from an IRA directly to certain bona fide 501(c)(3) charities are still available beginning at age 70-1/2. The SECURE Act did not change the rules regarding QCDs.
Miscellaneous Provisions:
  • New exception to 10% early distribution penalty. Now up to $5,000 can be distributed penalty-free for a qualified birth or adoption; the distribution must occur during a one-year period beginning on either the date of birth or the finalization of adoption of a child under 18.
  • IRA contributions after age 70-1/2. Contributions can be made so long as the individual receives compensation from either wages or self-employment income.
  • 529 Plan distributions. Allowable expenses are further expanded to include fees, books, supplies and required equipment for certain apprenticeship programs and for qualified student loan repayments.
  • “Kiddie” Tax. The SECURE Act has now once again reverted to the previous rule which taxes a child’s unearned income over a threshold amount at the parents’ marginal tax rate. Additionally, individuals can file amended tax returns and can elect to apply this change retroactively for taxable years 2018 and 2019.
As you can see, there are many new provisions that can affect your overall financial plan for your retirement years.
If you feel that we may be a good fit to work together on your retirement goals, please don't hesitate to contact us. As a valued 1st Nor Cal member, we invite you to contact us for a complimentary financial analysis. We also invite you to attend any Retirement Planning workshops that we hold. For more information about our practice, or to make an appointment, please call us at (925) 370-3750 or visit our website www.vitucciintegratedplanning.com.
2890 N. Main Street, Suite 201
Walnut Creek, CA 94597
925.370.3750
info@vitucciplanning.com
 
Securities through First Allied Securities, a registered broker dealer, member FINRA/SIPC. Advisory services offered through First Allied Advisory Services, Inc. Registered Investment Advisor. Investments not FDIC or NCUA/NCUSIF insured, not insured by Credit Union, may lose value. Products offered are not guarantees or obligations of the Credit Union, and may involve investment risk including possible loss of principal. 1st Nor Cal CU, Bay Area Retirement Solutions and First Allied are all separate entities. Jason Vitucci CA Insurance Lic.: 0F59894, Gene A. Schnabel CA Insurance Lic.: 0663016
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