SECURE, CARES, and IRAs

Various factors have brought about a flurry of changes in IRA rules. It is important that individuals understand these modifications, what they mean now and what they could mean to their retirement planning.

The Setting Every Community Up for Retirement (SECURE) Act, which became effective January 1, 2020, enacted several changes with regard to required minimum distributions (RMDs), beneficiary distribution rules for non-eligible designated beneficiaries and contributions to Traditional IRAs. These new rules:

  • Increased the age at which RMDs commence from 70-1/2 to 72 for individuals who turn 70-1/2 on or after December 31, 2019. Old rules apply for all others.
  • Eliminated the ability of a non-eligible designated beneficiary to stretch life expectancy payments over the beneficiaries’ lifetime. For deaths occurring after December 31, 2019, the new provisions require that an inherited account be distributed in full within 10 years, unless the beneficiary is an Eligible Designated Beneficiary.
  • Enabled Traditional IRA contributions to be made at any age provided there is earned income, superseding original requirements that contributions cease after age 70-1/2.

Though its focus was on economic stimulus for businesses, the Coronavirus Aid, Relief, and Economic Security (CARES) Act also had impact on individual retirement planning, enhancing access to plan distributions and loans. Effective March 27, 2020. and the subject of further IRS guidance in June, related provisions included directives that:

  • Allow qualified individuals to treat as coronavirus-related distributions up to $100,000 in distributions made from their eligible retirement plans, including IRAs, between January 1 and December 30, 2020.
  • Exempt such a distribution from the 10 percent additional tax that otherwise generally applies to distributions made before an individual reaches the age of 59-1/2.
  • Enable a coronavirus-related distribution to be included in income in equal installments over a three-year period, with an individual having three years to repay a coronavirus-related distribution to a plan or IRA and undo its tax consequences.
  • Allow plans to implement certain relaxed rules for qualified individuals relating to plan loan amounts and repayment terms. For instance, plans may suspend loan repayments due from March 27 through December 31, 2020, and the dollar limit on loans made between March 27 and September 22, 2020, is raised from $50,000 to $100,000.

And this is just the tip of the iceberg, beneath which lie more changes, new rules and unanticipated alterations in when, how and why IRA funds can be accessed.

If you haven’t yet navigated the twists and turns of the new laws and guidance, we’d be happy to help. Combining our expertise with your current needs and retirement goals we can help you avoid any false moves and perhaps even discern ways you can make these efforts work in your favor.

Don’t wait. The windows of opportunity are narrow. Luckily, our door is always open for our clients and those who wish to join their ranks.

Stay safe, everyone.

 

Disclosure:

This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual, nor should it be construed as tax advice.   Additionally, you should consult with your Financial Advisor, Tax Advisor or Attorney on your specific situation.  The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, Association.  All efforts have been made to report or share true and accurate information.  However, J.L. Bainbridge & Company, Inc., is unable to verify the content and the content is subject to change and become materially inaccurate without notice.  For additional information about J.L. Bainbridge & Company, Inc., (CRD # 108058) please visit the SEC Website at www.adviserinfo.sec.gov.  For a copy of the firms ADV Part 2 Brochure and or Form CRS, please contact us at 941-365-3435.