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What Does the SECURE Act Mean for Your RMDs?

Jan 11, 2020 | Kevin Troy |

What Does the SECURE Act Mean for Your RMDs?

Say hello to the SECURE Act! On January 1, most of the new law’s provisions came into effect, revamping many of the rules for retirement accounts that we have lived with for decades. One of the significant changes in the SECURE Act is the delay in the age at which required minimum distributions (RMDs) must start: from age 70½ to age 72.

The new rule begs the question how people who reached age 70½ in 2019 are affected. Some had already taken RMDs in 2019, while others were waiting to take their first RMD until closer to their required beginning date of April 1, 2020. So, what will happen to those who reached 70½ in 2019? Do they still need to take an RMD for 2019? And can they then stop RMDs until they reach age 72?

If you were hoping to get a reprieve from starting your RMDs, the SECURE Act will disappoint you. Under the new law, you can only delay RMDs if you reach age 70½ after December 31, 2019. If you reach age 70½ in 2019, the old rules still apply to you, which means you must take an RMD for 2019 and for each year thereafter. Only if you reach age 70½ in 2020 or later will you be able to delay your RMDs until April 1 of the year following the year you reach age 72.

Example 1: Susan celebrated her 70th birthday on January 20, 2019, which means she reached age 70½ in July 2019. She decided to delay her RMD until the spring of 2020. With the SECURE Act, the rules for Mia are unchanged. She must still take her 2019 RMD by April 1, 2020, and her RMD for 2020 by December 31, 2020.

Example 2: James celebrated his 70th birthday on August 5, 2019, so he will be 70½ in February 2020. With the SECURE Act, James can delay taking his first RMD until April 1 of the year following the year he reaches age 72, so he must take an RMD for 2021. His deadline for taking his 2021 RMD would be April 1, 2022, and he would need to take his RMD for 2022 by December 31, 2022.