What happened to 70½?

It’s gone! Well, almost.

Because of the provisions in the new Secure Act, people who turn 70½ on or after January 1, 2020, will not be required to take minimum distributions from their IRAs until age 72.

This new law also affects Qualified Charitable Distributions (QCDs) – the way to give to charities via your required minimum distributions (RMDs). Since this giving method is advantageous when a person is taking required minimum distributions, those who are not already 70½ will have to wait until age 72 to get the full benefit of this tax-saving strategy. Technically, people in this age group can do QCDs at age 70½, but because of some complicated provisions in the law, we do not believe it makes sense for them to do so.

Here’s where age 70½ still applies:

If you have already been taking required minimum distributions but have not yet reached age 72, nothing changes for you. You will need to continue to take RMDs. You will also be eligible to make Qualified Charitable Distributions and will receive the full tax benefit.

Who came up with the number 70½ anyway? It was always more confusing than a nice, easy-to-remember whole number. We believe the number 72 will be less confusing for people. It will also allow extra time to contribute to IRAs and additional time for IRA accounts to compound before people are required take money out of them.

If you have any questions about how the new law applies to your specific situation, please contact your advisor at Master’s. He will be happy to discuss this with you.