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2020 Major Tax Law Changes

Laws change and so must your strategies. Effective January 1, 2020, there are now 29 new provisions under the SECURE Act of 2019. Signed into law in December 2019, there are 3 key tax law changes that have an immediate impact on retirees and those that have retirement accounts such as IRA’s, 401k’s, 403b’s and 457 plans.

The new tax laws will have a significant impact on tax planning, retirement planning and estate planning strategies now and in the future causing both challenges and multi-generational planning opportunities. You need to make sure your advisor is versed on these tax laws and how they impact your particular situation.

Increased Required Minimum Distribution (RMD) Ages
Today the law requires that most individuals take out required minimum distributions (RMDs) from their retirement accounts once an individual reaches age 70.5. The SECURE Act delays this requirement to age 72. If you have already turned 70.5 however in 2019, then your RMD’s are not delayed and you must follow the same rules prior to passage of the SECURE Act.

Removal of Age Limitation on IRA Contributions
For years there has been a rule that essentially discouraged retirement savings in IRAs for people who continued to work later in life. After age 70.5, you could no longer contribute to an IRA. The SECURE Act removes this limitation by removing the age restriction.

Stretch IRA elimination
Prior to this change, non-spouse designated beneficiaries had the option to take distributions over their life expectancy, therefore “stretching” distributions over many, many years. Beginning in 2020 any retirement account owners who pass away, non-spouse beneficiaries will have only 10 years to withdraw the entire account balance. There are no required minimum distributions within that time frame, but the account balance must be zero after the 10th year. This new law could have a dramatic tax impact on these beneficiaries causing them to pay substantially more income taxes than under prior laws. The rule does not apply to spousal beneficiaries, as well as disabled beneficiaries and those who are not more than 10 years younger than the account holder (such as a slightly younger sibling, for example). Minor children are also exempt, but only until they reach majority age. After that, they will have 10 years to withdraw the assets in an inherited account.

At Total Wealth Planning, we help our clients every day answer these important and at times stressful questions. Who’s helping you?

Financial planning is complex and requires the guidance of a trusted and experienced advisor, such as a fee-only Certified Financial Planner™ (CFP®), who plans comprehensively, and with a complete understanding of your particular concerns and goals in life.

For more information about the financial planning strategies we utilize, please visit us at or contact directly Rob Lemmons, CPA, CFP® at 513-984-6696.

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