Sarah Brenner, JD
The SECURE Act is here! Most of new law’s provisions kicked in on January 1, 2020, overhauling many of the rules for retirement accounts that have been with us for decades. One significant change the SECURE Act brings us is the delay in the age at which RMDs must start from 70 ½ to 72.
This new rule has raised questions as to how those who reached age 70 ½ in 2019 are affected. Some had already taken 2019 RMDs. Others were waiting to take their first RMD until closer to their required beginning date of April 1, 2020. What happens now to those who reached 70 ½ in 2019? Do they still need to take an RMD for 2019? Can they then stop RMDs until they reach age 72? Would they have a new required beginning date?
The SECURE Act provides some disappointing answers to these questions to those who were hoping to get a reprieve from starting RMDs. The ability to delay RMDs that is available under the new law is only available to those who reach age 70 ½ after December 31, 2019. Those who reach age 70 ½ in 2019 are subject to the old rules. This means that they must take an RMD for 2019 and for each year thereafter. Only those who reach age 70 ½ in 2020 or later will be able to delay RMDs until April 1 of the year following the year they reach age 72.
Example: Kate celebrated her 70th birthday on January 20, 2019. She then reached age 70 ½ in July of 2019. She decided to delay taking her 2019 RMD until spring of 2020. With the passage of the SECURE Act, the rules for Kate have not changed. She still must take her 2019 RMD by April 1, 2020 and her RMD for 2020 by December 31, 2020.
Example: Gerry celebrated his 70th birthday on August 5, 2019. He will be 70 ½ in February of 2020. The SECURE Act allows Gerry to delay taking his first RMD until April 1 of the year following the year he reaches age 72. Jerry will need to take an RMD for 2021. His deadline for taking his 2021 RMD would be April 1, 2022. He would need to take his RMD for 2022 by December 31, 2022.