As many know, the rule prior to the new SECURE Act stated required minimum distributions (RMDs) from traditional IRA or other qualified retirement plans were required to be taken by April 1 following the year a taxpayer reached the age of 70 ½. This rule is still in place for people who turned 70 ½ before January 1, 2020.
If you turn 70 ½ after December 31, 2019, then the new rule applies to you! The new rule is the age has now been increased to 72 from 70 ½. So you will only have to start taking RMDs by April 1 the year after you turn 72.
The SECURE Act also repealed the age restriction on traditional IRA contributions. So starting in tax year 2020, you can make contributions to your traditional IRA well after you’ve turned 70 ½ only if you have earned income to contribute.
Not to make things even more confusing, but in order to have a contribution count towards your 2019 tax year, it must be done by April 15, 2020. But if you were 70 ½ or older as of December 31, 2019, then you still fall under the old rules for 2019 and can’t contribute. However, starting in tax years 2020 and beyond, you can make contributions as you wish!
As always if you have any questions, contact your Henry+Horne tax adviser!
Christine Sanchez, MSA