The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law late in 2019. One of its provisions changed the rules for required minimum distributions (RMDs).
RMDs are the amounts owners of IRAs, 401(k)s, and other tax-advantaged retirement plan accounts must withdraw from those accounts every year to avoid tax penalties. In some cases, retirees take more than the required minimum amount, especially when they are using the funds for income.
Prior to passage of the SECURE Act, Americans were required to take RMDs in the year they reached age 70½. This rule continues to apply to anyone who reached age 70½ prior to 2020. The Internal Revenue Service (IRS) defines age 70½ this way: The date that is six calendar months after your 70th birthday.
Beginning in 2020, owners of tax-advantaged retirement accounts do not have to begin taking RMDs until the year in which they reach age 72.
While the SECURE Act changed the age for RMDs, Qualified Charitable Distributions (QCDs) from IRAs were not affected by the new law. QCDs still can begin at age 70½.
RMDs can be complex, especially for households that have several IRA and retirement plan accounts. It’s a good idea to consult with a financial or tax professional before making any RMD decision. If you would like to discuss the finer points of RMDs, or receive some assistance calculating RMDs, get in touch. We’re happy to help.