The new RMD age for Self-Directed IRAs in 2020 has increased from age 70 1/2 to age 72.
The new Setting Every Community Up for Retirement Enhancement (SECURE) Act was recently signed by the President. It is said to be the most important piece of retirement legislation in over a decade. The SECURE Act was designed to help individuals save for retirement by implementing a few key provisions, many of which are currently in effect.
New RMD Age for Self-Directed IRA
The provisions of the SECURE Act will make it easier and more cost effective for small businesses to establish a 401(k) plan; allow multiple unrelated employers to join a pooled employer plan (MEP), and the new RMD Age for the Self-Directed IRA (and all IRAs) has increased from age 70 1/2 to 71. This gives retirement holders a little more time to allow their retirement funds to grow prior to necessary distributions.
Many of the provisions will impact retirement savers for the better. In fact, the increase for the RMD age may even increase the demand for Self-Directed IRAs.
The Self-Directed IRA Just Got Better
Before the SECURE Act impacted IRAs, the Self-Directed IRA was always an advantageous retirement account, particularly if you wished to invest outside of Wall Street. A Self-Directed IRA, established at a Trust company, allows you to hold alternative investments, like real estate and cryptocurrency, in a retirement account. This is in addition to purchasing stocks, bonds, CDs and other traditional investments.
The Self-Directed IRA allows you to select more diversified investments, thus achieving retirement portfolio diversity, which will better secure your investments.
Self-Directed IRA with Trust Company
If you wish to establish a Self-Directed IRA for alternative investments, then you must go through a Trust company, such as IRA Financial Trust. We do not sell products or offer investment advice, therefore you are not limited to the types of investments you can make with your Self-Directed IRA. Whereas, establishing a Self-Directed IRA at a bank or financial institution will likely limit your investment choices to the financial products the bank or institution sells, like stocks.
If the bank (e.g., Wells Fargo(, or financial institution (e.g., Vanguard) doesn’t sell real estate, cryptocurrency or precious metals, then it’s likely that you will not be allowed to make such investments even though the IRA is marketed as “Self-Directed.”
You can learn more about establishing your Self-Directed IRA with IRA Financial Trust by contacting us directly at 800-472-0646.
Positive Impacts of the SECURE Act for IRA Holders
Many provisions of the SECURE Act have already gone into effect, while others will become effective later in 2020. Although 401(k) plan participants were the “big winners,” as the SECURE Act provided 401(k) participants with the most benefits, IRA holders received their share of benefits, such as the increased RMD age. Additionally, the SECURE Act will repeal the prohibition on contributions to a traditional IRA for individuals age 70 1/2.
RMD Increase A Boon for IRA Holders in 2020
The new RMD age is one thing IRA holders can look forward to, particularly because Traditional, Roth and Self-Directed IRA accounts did not receive an increase in their contribution limits. Whereas 401(k) participants received a bigger tax break, as contribution limits for 401(k) plans did rise for 2020. This includes the Solo 401(k) plan for the self-employed and small business owners with no full-time employees.
With the many positive impacts of the SECURE Act, including the new RMD age for Self-Directed IRA participants, IRA holders certainly will not be excluded in receiving their benefits in 2020.