30 Jul What the SECURE Act Could Mean for Retirement Plans
If passed, it would change some long-established retirement account rules.
If you follow national news, you may have heard of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Although the SECURE Act has yet to clear the Senate, it saw broad, bipartisan support in the House of Representatives.
This legislation could make individual retirement accounts (IRAs) a more attractive component of retirement strategies and create a path for annuities to be offered in retirement plans. However, it would also change the withdrawal rules on inherited “stretch IRAs,” which may impact retirement and estate strategies nationwide.1
Let’s dive in and take a closer look at the SECURE Act.
The SECURE Act’s potential consequences. Currently, traditional IRA owners must take annual withdrawals from their IRAs after age 70½. Once reaching that age, they can no longer contribute to these accounts.
These mandatory age-linked withdrawals can make saving challenging for older workers. However, if the SECURE Act is signed into law, that cutoff will vanish, allowing people of any age to keep making contributions to traditional IRAs, provided they continue to earn income.1
(A traditional IRA differs from a Roth IRA, which allows contributions at any age if your income is below a certain level—at present, less than $122,000 for single-filer households and less than $193,000 for married joint filers.)2
If the SECURE Act becomes law, you won’t have to take required minimum distributions (RMDs) from a traditional IRA until age 72. You could also take an RMD from your traditional IRA and contribute to it in the same year after reaching age 70½.3
The SECURE Act would also effectively close the door on “stretch” IRAs. Currently, non-spouse beneficiaries of IRAs and retirement plans may elect to “stretch” the required withdrawals from an inherited IRA or retirement plan—that is, instead of withdrawing the whole account balance at once, they can take gradual withdrawals over time or even their entire lifetime.
This strategy may help beneficiaries manage the taxes linked to the inherited assets. If the SECURE Act becomes law, it will set a 10-year deadline for such asset distributions.4
What’s next? The SECURE Act has reached the Senate. This means it could move into committee for debate, or it could end up attached to the next budget bill to circumvent delays. Regardless, if the SECURE Act becomes law, it could change retirement goals for many people—if you have questions how it may affect you, make sure to talk with your financial advisor.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 – financial-planning.com/articles/house-votes-to-ease-rules-for-rias-correct-trump-tax-law [5/23/19]
2 – irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2019 [6/18/19]
3 – congress.gov/bill/116th-congress/house-bill/1994 [6/17/19]
4 – shrm.org/resourcesandtools/hr-topics/benefits/pages/house-passes-secure-act-to-ease-401k-compliance-and-promote-savings.aspx [5/23/19]
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor serving the greater Sacramento area with an office in Roseville, CA. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country’s leading professional association of fee-only financial advisors.