How will the SECURE Act affect you and the beneficiaries of your retirement accounts?

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law by President Trump on December 20, 2019. The law became affective January 1, 2020.

Eliminates the age limit for making traditional IRA contributions

It increases the required beginning date (RBD) for required minimum distributions (RMDs) from your individual retirement accounts from 70 ½ to 72 years of age, and it eliminates the age restriction for contributions to qualified retirement accounts.

Eliminates the “Stretch IRA” by mandating inherited IRAs, for non-spouse beneficiaries, be withdrawn and taxes paid within 10 years.

However, perhaps the most significant change will affect the beneficiaries of your retirement accounts: The SECURE Act requires most designated beneficiaries to withdraw the entire balance of an inherited retirement account within ten years of the account owner’s death. In the past, a non-spouse beneficiary of an IRA could stretch out RMDs from the plan over their own life expectancy.

In addition, the SECURE Act does provide a few exceptions to this new mandatory ten-year withdrawal rule:

  • Spouses
  • Beneficiaries who are not more than ten years younger than the account owner
  • The account owner’s children who have not reached the “age of majority”
  • Disabled individuals
  • Chronically ill individuals

Many beneficiaries will now see higher taxes and a shorter distribution period for inherited retirement accounts under this change.

Therefore, proper analysis of your estate planning goals and planning for your intended beneficiaries’ circumstances are imperative to ensure your goals are accomplished and your beneficiaries are properly planned for.

What do you do now that the RMD (required minimum distributions) rules have changed?

  1. Review your beneficiaries – Make sure all your beneficiary designations are in order and that they still match up with your intended goals.
  2. Take a close look at your trust

Give us a call today to schedule an appointment to discuss how your estate plan and retirement accounts might be impacted by the SECURE Act.