Save More for Retirement

Retirement account rules are changing for 2020. Here are the major changes and some suggestions to help you take advantage of them.

Contribute to a traditional IRA at any age.

While you have always been able to contribute to a Roth IRA at any age, 70½ was the cut-off for making contri­butions to a traditional IRA. This age limit for traditional IRAs is now gone. If you have earned income, you and your spouse can now each contribute $6,000 to either a traditional or Roth IRA ($7,000 for those age 50 and over).

Taking advantage:

Consider getting a part-time job or do some consulting so you can earn up to $7,000 each year to contribute to your IRA. You can decide if you wish to contribute to either a Roth IRA or a traditional IRA depending on your situation.

More time before you MUST take money out.

You now have until age 72 before you are required to take minimum distributions from qualified retirement accounts. This is an increase from the old, complicated age 70½ rule. Retirement savings that need to be reported as taxable income when withdrawn can now be left to grow for an additional 18 months before distributions are mandatory and your taxable income increases.

Taking advantage:

By efficiently plan­ning your withdrawal amounts before age 72 you can often reduce the tax on these funds when withdrawn. So review the minimum distribution requirements of your IRAs, 401(k)s and other retirement savings accounts to develop a plan to take advantage of this new rule.

Inherited retirement accounts require more planning.

Beginning in 2020, the MAXIMUM allowed distribution time frame from retirement accounts is limited to 10 years for newly-inherited IRAs. IRAs inherited before 2020 can still be withdrawn over a person’ s life­ time using old stretch IRA rules.

Taking advantage:

Estate planning just got a lot more important. First, know that the limited stretch rules DO NOT apply to surviving spouses, minor children up to age 18 (but not grandchildren), disabled individuals and individuals not more than 10 years younger than the IRA owner. Second, if you receive inherited funds, know that you often have a number of distribution options available to you. They include a lump sum distribution, a five-year distribution rule, rollover options and this new 10-year rule.

Income Brackets for 2020 Tax Rates

Retirement Plan 2020 2019 Change Age 50 or older catch-up
401(k), 403(b), 457 plans $19,500 $19,000 +$500 Add $6,500
IRA: Roth $6,500 $6,000 Add $1,000
IRA: SIMPLE $13,500 $13,000 +$500 Add $3,000
IRA: Traditional $6,000 $6,000 Add $1,000