The End of the Stretch IRA
The Stretch IRA was a financial strategy that allowed inherited IRAs to be stretched out over the lifetime of a beneficiary. To put it another way, Stretch IRAs allowed a beneficiary who was younger than the former owner of the IRA to stretch out distributions over the beneficiary’s (presumably longer) lifetime, resulting in a longer period of time for funds to compound principal and defer tax.
The SECURE Act signed into law on December 20th, 2019 ended the ability to use Stretch IRAs as a financial strategy. Under the new law, beneficiaries inheriting an IRA are required to take the funds out, and pay the appropriate taxes, within 10 years of the death of the original IRA owner.
Changes to Age for IRA RMDs
Another IRA rule that has changed under the SECURE Act is the age at which a traditional IRA owner is required to begin taking their required minimum distributions (RMDs). Previously, an IRA owner was required to start taking distributions out of their IRA by April 1st of the year after turning 70 1/2. The SECURE Act changed that age to 72, unless you are already 70 1/2 or more as of December 31, 2019.
Do you have questions about how the legislative changes may impact you and your family? Contact us today!