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New Retirement Plan Rules – SECURE Act

The so-called SECURE Act was added into a year-end spending bill that was passed by Congress on December 19th.  In the coming months you’ll be seeing a lot in the financial news about this law and its implications.  Here are its major provisions that may impact your retirement planning:

Required Minimum Distributions:  Under old rules, RMDs for traditional IRA accounts had to start beginning at age 70 ½. Under the new law, these taxable mandatory distributions from IRAs will not have to start until age 72.  This new age rule applies to those who will turn 70 ½ in the year 2020 or later.

10-year distribution rule:  Under current rules, your non-spouse beneficiary is allowed to “stretch” inherited IRA distributions over their life expectancy.  For your child, this could mean prolonged tax deferral of their inherited retirement benefit over 20, 30 or 40-plus years.  Under the new law, for deaths occurring after 2019, most non-spouse beneficiaries will have to have their share of your IRA distributed within a 10-year time period.  This will bring major planning implications for larger inherited IRAs, and for high-income beneficiaries.  It may emphasize a planning tool that I have been using for many years with wealthier IRA clients, the partial Roth IRA conversion.  Be sure to check with me if you want to discuss this provision of the new law, or I’ll be reaching out to you for planning discussion.

529 Plan Funds for Student Loans:  The SECURE Act has expanded the permissible uses of 529 accounts to repayment of student loans.  However, this provision limits the use of 529 funds to repay student loan principal and interest to $10,000 per person, for life.  Interestingly, one may also distribute up to $10,000 from a 529 account to service the student loan debt of the siblings of the 529 plan beneficiary.

These are only 3 of the provisions of the SECURE Act that I found will have the most common application to my clients.  If you have questions about this new law, please reach out to me directly so that we can discuss how it may (or may not) apply to your specific situation.


Jared Walsh CFP®, CPA

Reservoir Wealth Management