The SECURE Act and How it Impacts You

The SECURE Act and How it Impacts You

Effective January 1, 2020, The Setting Every Community Up for Retirement Enhancement (SECURE) Act has been one of the most significant changes to retirement security in over 13 years. It puts into place numerous provisions affecting employers and employees all across the county.

With this Act comes with its share of issues, as certain provisions are designed to generate taxes, which means a tax increase for many. Additionally, it brings changes that require a renewed focus on multi-generational, multi-year planning. Despite the challenges that have come with the Act, it is possible to use it to your advantage, and the key is smart planning.

What Does This Mean for You?

So, let’s break this down simply. There are three major components to the SECURE Act:

  1. You can contribute to your Individual Retirement Account (IRA) past the age of 70½. This allows you to build up your retirement account as you are able to save for retirement for a longer period of time. Note: If you are under the income limits, you can still contribute to a Roth IRA and make rollover contributions to a Roth or Traditional IRA regardless of your age.
  2. You do not have to take the required minimum distribution (RMD) until the age of 72. This change from the previous age of 70½, gives your account additional time to grow.
  3. Upon the death of the IRA owner, with limited exceptions, most non-spouse IRA designated beneficiaries must now withdraw the entire amount of the IRA by the end of the tenth year following the IRA owner’s death rather than over the beneficiary’s life expectancy, which was allowed prior to the SECURE Act. This change results in the beneficiary likely having a higher income tax liability associated with the distributions from the IRA, and thus, the beneficiary will ultimately receive less.

Perhaps more importantly, however, if you are concerned about protecting your IRA proceeds from the creditors, future lawsuits, and/or divorcing spouses of your beneficiaries, you may have named a trust for the benefit of your beneficiary as the designated beneficiary under your IRA. In that case, you will want to review the terms of those trusts to determine how the SECURE Act may impact your goals and your plan in this regard. In some cases, a simple amendment to your testamentary plan may be advisable.

With the SECURE Act, some aspects of the laws governing retirement plans have changed, but many aspects remain the same. If you have any questions regarding the impact of the SECURE Act to you and your estate plan, we encourage you to reach out us! We would be happy to review your plan and ensure that your wishes are properly documented in light of the changes.