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Important Changes to IRA Rules and Regulations 2020


Secure Act (Setting Every Community Up for Retirement Enhancement) passed in both houses (Congress and the Senate) and signed into law on December 20th, 2019.


Age Limit Eliminated for Traditional IRA Contributions 

Beginning for Tax Year 2020 and beyond, the new law eliminates the age limit for Traditional IRA contributions (70 ½)  As with  ROTH IRA contributions, those with eligible earned income can continue to contribute to a Traditional IRA.


RMD age raised to 72  

The Secure Act increases the age for commencing RMDs to age 72.  IRA owners reaching the age of 70 ½ after 12-31-2019 will not have to take their first RMD until the year in which they attain age 72.


New Exception to the 10% Penalty for Birth or Adoption

The Secure Act adds a new 10% penalty exception for birth or adoption.
Distribution is still taxable.
Limited to $5,000.00 over a lifetime
Distribution can be re-contributed back at any future time


IRA Contributions with Fellowship and Stipend Payments

The new law allows taxable non-tuition fellowship and stipend payments to be treated as eligible compensation to qualify for IRA contributions.


The “Stretch IRA” Disappears for Inherited IRAs

Beginning for deaths of an IRA owner after 12-31-2019, the “Stretch IRA” rules will be replaced with a “Ten Year” distribution rule for most IRA beneficiaries.

  • Inherited IRA accounts to be emptied by the tenth year following the year of death of the IRA owner
  • No requirement for annual Beneficiary RMDs as currently exist
  • Eligible designated beneficiaries who will be exempt from this new 10 year payout rule:
  • Surviving spouse
  • Minor children (exception limited until child reaches age of majority.  Then will have 10 years to close the Inherited IRA )
  • Disabled individuals
  • Chronically ill
  • Beneficiaries not more than ten years younger than the IRA owner