The SECURE Act, Setting Every Community Up for Retirement Enhancement Act, has been in the news for many months now. Since the House passed this earlier in the summer there has not been much heard about it until recently. This piece of legislation has been attached to the spending bill that Congress is looking to pass before they break for the holiday. The House has already passed it and it is on to the Senate.
This is a complex act with many working parts. We will cover some of the highlights that will affect the largest majority of people.
We see one of the most sweeping changes in the way beneficiary IRA’s will be handled. The SECURE Act will eliminate the ability of the beneficiary (unless they are a spouse or fill another exception) to stretch the payments from the IRA over their lifetime, the well-known stretch IRA. Instead, beneficiaries will be forced to withdraw all the assets from the beneficiary IRA no later than 10 years after the account owner passes away. This will have significant impacts on the tax status, especially those in high brackets and their prime working years, of the beneficiary and could have other adverse consequences as a result too. This provision will have the potential for a negative impact over time.
The act does contain some provisions that will be helpful. Those who have IRA assets will not be required to take RMD’s (required minimum distributions) until the age of 72. This will only apply to those that have not attained age 70 ½ before the end of 2019. In addition, those who are working past the age of 70 ½ who currently cannot make IRA contributions will be able too.
The SECURE Act is being touted as the most sweeping piece of legislation in the retirement area since the passage of the Pension Protection Act of 2006. There are additional aspects of the act that will affect retirement plans which will potentially provide access to more people to save. In addition, the insurance industry has been a big proponent of this legislation because it will provide the ability for insurance products, specifically annuities, to be purchased inside of 401(k) plans. This is a big win for the insurance company, but I am not sure it is equally as beneficial for the general public looking to save.
The SECURE Act contains 29 new provisions and changes, far too many to cover in a blog post, but I believe we have covered the most important ones. It is going to be more important than ever in 2020 to make sure that you are working with a fiduciary advisor, who is working in your best interest, who understands how this act is going to affect you. There may be additional planning needed from an estate planning perspective if your current assets include a large retirement plan and/or IRA assets.
It looks highly likely that this legislation will pass later this week and you will want to make sure you know how this is going to affect you in 2020 and going forward. We will be addressing this with each of our clients in their upcoming meetings and suggest you make sure you are reviewing it too. Be sure to contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you would like to discuss the SECURE Act and what effect it could have on your family’s financial situation.
Be sure to share this article with friends, family and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.