SECURE Act Changes Put Focus on Retirement Planning. Are You Prepared?

Share on facebook
Share on twitter
Share on linkedin
Share on email

US Capitol Building SECURE Act

By Kristie Garrett, CFP®, CRPC® and Eric Sholberg, CPA, AIFA

Late last month, the Senate passed and President Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The law, broadly aimed at retirement security, introduces several provisions impacting both individual investors and employers overseeing 401(k) plans.

While we will not cover the law in its entirety—we encourage you to review Fidelity’s issue brief for more detail—we wanted to share key takeaways from the legislation that affect individual investors and retirement savers.

Increases the Required Minimum Distribution Age to 72

In the past, most individuals had to begin taking out annual required minimum distributions (RMDs) from retirement plans or IRA accounts in the year they turned age 70½. The SECURE Act delays that withdrawal requirement to age 72.

Note that this only applies to those who reach 70½ after 2019. If you turned 70½ during 2019, you still must take RMDs by April 1, 2020, and withdraw additional RMDs by December 31, 2020 and every December 31 thereafter.

In keeping with previous law, individuals working beyond age 72 can further delay taking RMDs from most employer-sponsored retirement plans until after retirement.

Eliminates Age Limitations on Traditional IRA Contributions

For individuals with earned income beyond age 70½, the SECURE Act also removes the maximum age limit—formerly capped at 70½ years old—for traditional IRA contributions.

Nothing changes for Roth IRAs—when eligible, you can continue to contribute at any age as long as you have earned income within eligible ranges.

Removes the RMD Provisions for Stretch IRAs

Effective January 1, 2020, non-spousal inheritors of IRAs must exhaust distributions by the end of year 10 (exceptions apply for “eligible designated beneficiaries,” as explained below) after the original account owner passes away.

Non-spousal beneficiaries can no longer “stretch” IRA withdrawals over the span of their lives. The new rule also applies to inherited 401(k) and Roth IRA accounts, but distributions from the latter are not taxable.

The smaller window for inherited RMDs may result in a heavier tax burden for beneficiaries who may also be in peak earning years. Before the owner of an IRA or retirement plan passes away, it can make strategic sense to consult your tax advisor to consider Roth conversions.

Eligible designated beneficiaries, including surviving spouses, minor children of the decedent, disabled or chronically ill beneficiaries, and beneficiaries who are less than 10 years younger than the decedent, may continue to stretch RMDs over their lifetime. Once a minor reaches the age of majority, the 10-year withdrawal provision applies.

Our team will continue to evaluate the SECURE Act and share any additional highlights in the coming months.

Kristie Garrett, CFP®, CRPC® and Eric Sholberg, CPA, AIFA serve as retirement plan advisors at Brighton Jones. 

Read more from our blog:

equality can't wait challenge two young girls
Compassion, Community, and Culture

Equality Can’t Wait Challenge

The Equality Can’t Wait Challenge from MacKenzie Bezos and Melinda Gates will support transformational ideas that aim to expand women’s power and influence.

Read More »

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Brighton Jones LLC), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained on this blog serves as the receipt of, or as a substitute for, personalized investment advice from Brighton Jones LLC.

To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Brighton Jones LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Brighton Jones LLC’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Brighton Jones is not affiliated with Facebook, Twitter, LinkedIn, Google+, YouTube or other social media websites and we have no control over how third-party sites use the information you share. Please remember that you should never communicate any personal or account information through social media and it is important to familiarize yourself with their respective privacy and security policies.