Happy New Year!
If you were busy shopping for that last-second Christmas present or just enjoying an egg nog with family, you may have missed that Congress recently passed an interesting bit of legislation. On December 19th, the Setting Every Community Up for Retirement Enhancement (SECURE) Act – you can't make that up – was attached to a year-end appropriations bill keeping the government open for business, signed into law by President Trump effective January 1, 2020.
Don't let the lack of fanfare fool you. The SECURE Act is a material change to the tax treatment of retirement plans and accounts, and presents new challenges, especially for retirees and their heirs.
While this post is not intended to be an exhaustive review of the new law, I wanted to alert you to just a couple of the provisions that will likely have the most wide-reaching impact to anyone in – or nearing – retirement:
The Required Minimum Distribution age increased to 72
Previously an IRA owner would be required to begin taking distributions from their IRAs in the year they turned 70 ½. That age is now 72. That is not a major change, but for those who are only taking these taxable distributions because they are forced to, this is a welcome relief. Unfortunately, if you are between 70 ½ and 72 and already receiving distributions, you cannot hit the pause button.
The lifetime "stretch" IRA strategy for non-spouse beneficiaries is gone
The previous law would generally allow non-spouse beneficiaries to "stretch" their required distributions of an inherited IRA over their lifetime. Now that timeframe is limited to 10 years. That means that the entire balance of the inherited IRA must be distributed 10 years after receipt of the inheritance. For those whose IRA beneficiaries are currently non-spouses, this is potentially a huge change and there will be some planning opportunities to consider for this. This will be something that your advisors will be addressing.
Our advisors will be busy reviewing situations where the new law is impacting our clients and will be reaching out as appropriate. If you have any specific questions about your situation, please reach out to me at firstname.lastname@example.org.