Get started
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Teach Me

What’s Changing for Retirement Accounts in 2020

January 06, 2020

3 min read

Small but important changes are coming to retirement accounts starting in 2020.

Tucked away in the $1.4 trillion spending bill that Congress passed at the end of 2019 is something called the SECURE Act, short for “Setting Every Community Up for Retirement Enhancement.” The act will increase the age at which retirees are required to start taking money out of retirement accounts such as IRAs and 401(k)s. It also eliminates age limits for making contributions to these plans.

The changes could help to address a retirement savings crisis, according to reports, as well as provide more time for people to save as they live longer and work longer.

Changes for 2020

Here’s a look at what’s changing for retirement plans, starting in the 2020 tax year:

RMD age increase: The new law increases the required minimum distribution (RMD) age to 72, from age 70 ½. An RMD is an amount you’re required by tax law to take out of a retirement account each year, based on an Internal Revenue Service (IRS) formula, once you’ve reached that age. The new law applies to people who will turn 72 after December 31, 2019.

Repeal of age limit for contributions: Previous rules allowed people to put money into their retirement accounts until age 70 ½, after which the IRS required them to withdraw money. The new law removes this age restriction, and lets people contribute as long as they earn income from wages.

Annuities: The law will allow employer-sponsored workplace retirement plans to offer annuities. Annuities, which are contracts between insurance companies and investors, can provide a fixed amount of income in retirement, but generally require monthly or bulk payments over a period of time before payouts begin. Annuities are considered somewhat controversial due to their expenses and often limited payouts, according to some experts.

The law has additional provisions that could help consumers in other ways.

For example, people will now be able to  use up to $10,000 from a 529 account to repay student loan debt. A 529 is an education savings vehicle that allows consumers to save and invest money on a tax-deferred basis. Similarly, people will be able to withdraw up to $5,000 penalty free from an IRA or 401(k) for expenses related to the birth or adoption of a child. (Consumers will still have to pay taxes on the withdrawn amounts, according to reports.)

The changes to IRA and workplace retirement plans follow IRS contribution limit increases to 401(k)s for 2020.

More about retirement accounts

IRAs and 401Ks are both tax-advantaged retirement accounts that could help you save for retirement.

You typically have access to a 401(k) through an employer, who may also provide an employer-match benefit, whereas anyone can open an IRA by setting up an account at a bank or brokerage.

Both accounts can allow you to save for retirement by investing in products such as CDs, stocks, bonds, and other securities. Both IRA’s and 401(k)s come in two flavors—traditional and Roth.

You can learn more about 401(k)s and IRAs here.

Save for your future

Saving for retirement can be an important part of a comprehensive financial plan, which can also include setting short-term and long-term goals for your money. Short term goals can include creating a budget, setting up a savings account for unexpected expenses as they arise, as well as building an emergency fund with three to six months worth of expenses for unexpected life events such as medical bills or layoffs.

Longer-term goals can include investing, and saving and investing for retirement.

Check out Stash’s financial checklist for 2020 to help you get started planning your financial life this year.

Welcome to your new financial home.

Start today with any dollar amount.

Get the App

Hooked on Stash? Tell your friends!

Get $5 for every friend you refer to Stash.

Refer friends

Hooked on Stash? Tell your friends!

Get $5 for every friend you refer to Stash.

Refer friends

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

*This information should not be relied upon as research, investment advice or Tax advice. This information is strictly for illustrative and educational purposes and is subject to change. For additional tax related questions, please consult a Tax professional.

Investment Profile

Legal Cannabis Industry

Get all the details on investing in marijuana and the cannabis industry legally.

Learn more
Explore more articlesChoose a topic to learn more about
Technology love and money Retirement pop culture social media

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.