The RMD age is changing
Contributions to IRAs beyond age 70-and-a-half
Current rules do not allow for contributions to IRA accounts after age 70-and-a-half.
Under the new law, individuals with earned income will be able to continue to contribute to their IRA after age 70-and-a-half. This change may help workers that have chosen to delay retirement in order to continue to build their retirement nest egg.
Retirement account withdrawals for birth or adoption expenses
New rules will allow parents to make penalty-free withdrawals of up to $5,000 from their retirement account for expenses associated with birth or adoption.
The distributions can be made up to one year from the birth or adoption of a child and the maximum amount of $5,000 is per parent, so you will be all owed a $5,000 distribution from each of the parent’s retirement accounts, totaling $10,000.
While income tax will still have to be paid on pre-tax contributions that are withdrawn, no penalties will apply to the withdrawal, potentially saving parents 10%.
Elimination of Stretch IRAs
Under current rules, individuals that inherit an IRA can choose to distribute these assets slowly over their lifetime.
This strategy is called the “Stretch IRA” because beneficiaries keep the bulk of their inherited IRAs growing tax deferred while they stretch distributions over their lifetime.
The SECURE Act will now require that inherited IRAs be distributed within 10 years.
There are exceptions and details for this rule that should be discussed with a tax and financial advisor as this can affect estate plans that are already in place.
If you have questions regarding this new SECURE Act or any other tax related questions, please consult with a tax advisor. If you need one, contact us, Sternbach & Rose, CPAs.