The Impact of the SECURE Act on Required Minimum Distributions and Qualified Charitable Distributions
Age Raised to 72 for the Required Minimum Distribution (RMD)
It’s 2020, and if you turn 70 ½ this year, it’s no longer your “magic year” for taking a required minimum distribution (RMD). With the stroke of a pen, the new SECURE Act has pushed your magic year back to the year you turn 72. You can delay your start date back until April 1 of the year you turn 73, but you must then take both your age 72 and age 73 distributions in the same year.
If you turned 70 ½ in 2019 or before, then nothing has changed. You need to abide by the old rules and continue taking your distributions as previously required. If you delayed your start date to this year, then you must take the first distribution by April 1 and the second one by December 31.
No Change to the Qualified Charitable Distribution (QCD)
Nothing has changed for clients who are age 70 ½ or older and are making qualified charitable distributions (QCDs) directly to their church or other charities. For those turning 70 ½ this year, you may still make a charitable distribution from your IRA even though you don’t have an RMD until age 72. Remember, the QCD must start after your actual 70 ½ birthday, not just the year in which you turn 70 ½.
Good Bye to the Stretch IRA
If you inherited an IRA before 2020, you can continue “stretching” required minimum distribution payments over your lifetime. If you inherit an IRA this year or later, there are no more RMDs, but you must distribute the entire balance of the account by the end of the 10th year following the year of the owner’s death. You can structure payments any way you want so long as the balance is zero after the 10th year. There are 5 exemptions: 1) for your surviving spouse, 2) for minor children, 3) for disabled individuals, 4) for the chronically ill, and 5) for beneficiaries who are less than 10 year younger than the owner.
If you have any questions regarding the SECURE Act about these or other aspect of the SECURE Act, feel free to call or email us to discuss it.
Ian Harris, CFP®