SECURE Act Note: The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) was signed into law in December of 2019, with most provisions taking effect in January 2020. T. Rowe Price is currently reviewing all the provisions of the SECURE Act and will be updating systems and applications accordingly.
One of the significant and immediate changes in the law extended the starting age for individuals with any type of IRA (including SEPs & SIMPLE IRAs, but not Roth IRAs) to start taking required minimum distributions (RMDs) from 70½ to 72. This change in age is only available for individuals who haven’t reached age 70½ by 12/31/19. If you turned 70½ in 2019 or earlier, you are still required to take your required minimum distributions for the year you turn 70½ and each subsequent year.
Therefore, if you haven’t reached the age of 70½ on or before 12/31/19, you don't have to start taking withdrawals from your Traditional, Rollover, SEP, and SIMPLE IRAs until you reach age 72. (Please note: If you turned 70½ in 2019 or earlier, you are still required to take your required minimum distributions). These required minimum distributions (RMDs) are mandatory minimum withdrawals, and we can help you understand some of the things that you need to know and discuss with your tax advisor.
For non-IRA retirement plans, generally, if you had not reached 70½ (or if you are over age 70½ and didn’t retire) by 12/31/19, you do not need to take RMDs in 2020. You will need to start RMDs when you turn 72, and then by December 31st each following year. If you turned 70½ and were retired on or before 12/31/19, you will be required to take an RMD for the year in which you turned 70½ and then by December 31st each following year. Please note that in either situation, you can delay taking your 1st RMD until April 1st of the year after you reach RMD requirements. If you defer taking your 1st RMD until April 1st of the following year, you will still be required to take another (your 2nd) RMD prior to December 31st.
Please look at your plan document or speak with your current plan administrator and/or former plan administrators for prior plans that you participated in, for details regarding your RMD requirements. T. Rowe Price does not provide tax or legal advice. Please speak with your advisor regarding any additional questions specific to your situation.
With Traditional IRAs, if you reached age 70½ on or before 12/31/19, then RMDs are required in the year you turned 70½, and then by December 31st each following year. If you haven’t reached 70½ on or before 12/31/19, then RMDs are required when you turn 72, and then by December 31st each following year. Please note that in either situation, you can delay taking your 1st RMD until April 1st of the year after you reach RMD requirements. If you defer taking your 1st RMD until April 1st of the following year, you will still be required to take another (your 2nd) RMD prior to December 31st.
If you have multiple IRAs, you must calculate the appropriate RMD for each one. However, the total distribution amount can then be taken from any one or more IRAs to satisfy the required amount.
Once the RMD is distributed, you don’t have to spend it, but you may choose to reinvest it in a taxable account. An RMD cannot remain in the tax-deferred account.
Generally, your RMDs are taxed as regular income within the year they are taken. RMDs can also be subject to state and local taxes. Please consult a tax advisor for more detailed information.
If you don’t take the correct RMD amount, IRS penalties may apply.
NOTE: If you have employer retirement accounts, you will have to contact your current and/or prior employer to calculate the RMD and request a distribution. Or, if your employer retirement account(s) is with T. Rowe Price, you can log in to the workplace retirement website to learn more.
While taking RMDs is mandatory, you don’t have to spend it if you don’t need to. You can reinvest the money or add it to your rainy day fund.
All investments are subject to market risk, including the possible loss of principal.
This material has been prepared by T. Rowe Price Retirement Plan Services, Inc., for general and educational purposes only. This material does not provide fiduciary recommendations concerning investments or investment management. T. Rowe Price Retirement Plan Services, Inc., its affiliates, and its associates do not provide legal or tax advice. Any tax-related discussion contained in this website, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or professional tax advisor regarding any legal or tax issues raised in this material.
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