You may have already heard that year-end legislation to fund the government included changes to retirement savings law. The following chart offers an overview of what we know (or believe) to be true with respect to the new law. As with most legislation making such sweeping changes, the details, and implications for investors (pre- and post-retirement), will become more clear over time. Suffice it to say, we are monitoring the release of information from the Internal Revenue Service and will communicate such as it becomes available.
To ease any immediate concerns, there is nothing to do right now and any changes to existing plans – automatic distributions and the like – will be discussed with clients on an individual basis.
Wishing you all a very happy and prosperous New Year!!
| Topic | Changes * |
| Required Minimum
Distribution age |
The law raises to 72 from 70½ the age at which individuals must begin taking RMDs from their retirement accounts.
Important: The new law applies only to people who turn 70½ after December 31, 2019. If a person turned 70½ in 2019, the law does not apply—that person must take an RMD in 2019, 2020 and beyond. The law does not impact those retirees who are already taking RMDs. |
| Contributions to traditional IRAs | With respect to contributions, the law aligns the treatment of traditional IRAs with that of Roth IRAs. Beginning in 2020, individuals at any age may contribute to an IRA, as long as they have earned income. |
| Inherited IRAs | Under current law, inherited retirement accounts (often referred to as Stretch IRAs) can distribute those assets over the beneficiary’s lifetime.Under the new law, those assets must be distributed within 10 years (there are exceptions for spouses, minor children, disabled individuals and people less than 10 years younger than the decedent).
This provision has potentially significant estate planning implications. The new law does not affect existing inherited accounts. It only applies to accounts that are inherited in 2020 and beyond. |
| Other Changes | The new law includes various changes related to employer-sponsored retirement plans, penalty-free early withdrawals, and 529 plans. We’ll discuss these changes on an individual basis. |
* This information is taken from sources we believe to be accurate, but this material is not intended to replace the advice of a qualified tax advisor, attorney, or accountant. White Oak will work with your independent tax/legal advisor to help create a plan tailored to your specific situation.
