The SECURE Act stands for Setting Up Every Community for Retirement Enhancement. The Act has brought significant changes in the rules regarding IRAs and RMDs. And the good news is, all those rules are in the best interest of retirement savers like you. If you don’t know already, then below are the two significant benefits of the SECURE Act for people with IRAs and 401(k)s.
1 – You can contribute to the traditional IRA even beyond the age of 70½
Before the SECURE Act rolled out, you could no longer contribute to traditional IRA once you hit 70½. The new Act allows you to contribute even after turning 70½. Also, you can open the IRA account for the first time regardless of your age. For instance, you might save all your money in a 401(k) until you retired at 60. And now, if you’re still working, then you can open an IRA account to save some part of your income.
2 – The age for required minimum distributions pushes back to 72
Before the SECURE Act, you needed to start taking required minimum distributions or RMDs from your IRA and 401(k) account, once you turn 70½. The Act pushes back the age requirement to 72. It means you have more time to let your money sit and grow in a tax-advantaged way. Also, your IRS liability gets postponed, because your first RMD is due on the 1st April following the year you turn 72. So, you don’t have to worry about paying taxes on RMDs as early.
IRA holders must aware about the SECURE Act and the two most significant benefits of the SECURE Act for retirement savers. You can keep contributing beyond the age of 70½. And the age for RMDs has increased to 72 from 70½, as earlier.