The recently passed SECURE Act has implications for owners of retirement accounts. The two changes included in the act that would most affect our clients are changes in the age at which required minimum distributions must begin, and how quickly a beneficiary must withdraw inherited accounts. Required minimum distributions can now be delayed until the year in which an individual reaches the age of 72. This changes the previous requirement that withdrawals must begin at age 70 ½. SECURE also changes how non-spouse beneficiaries of retirement accounts are treated. Going forward, non-spouse beneficiaries must withdraw the entirety of the account within ten years beginning the year after the account owner’s death. Previously withdrawals could be made based upon a “life expectancy table” furnished by the IRS.
The old rules would have directed a 50-year-old non-spouse beneficiary to take just over 3% out of the account, gradually increasing to 4% by the year they would have turned 60. The new rules require a full distribution by the tenth year, where the prior rules often resulted in the account continuing to grow.