The new Setting Every Community Up For Retirement Enhancement (SECURE) Act is the broadest piece of retirement legislation passed in over a decade.

A Reason to Review Beneficiary Designations and Trusts

The elimination of the “stretch IRA” may have you wanting to revisit your estate plan. This new law generally requires any beneficiary who is more than 10 years younger than the account owner to liquidate the account within 10 years of the account owner’s death unless the beneficiary is a spouse, a disabled or chronically ill individual, or a minor child, instead of allowing them to spread the distributions (and their tax obligations) over their lifetimes.

Having a shorter distribution time could result in an unanticipated tax bill should a beneficiary inherit a high-value traditional IRA. This could also be true for IRA trust beneficiaries, which as a result could affect estate plans that intended to use a trust to manage inherited IRA assets.

With this elimination you may want to reevaluate your beneficiary choices, and revisit how IRA dollars fit into your overall estate planning strategy. For example, it may make sense to consider the possible implications of converting traditional IRA funds to Roth IRAs, which can be inherited income tax free.

Required Minimum Distributions

Before the SECURE Act, if you were retired and had any money in a traditional Individual Retirement Account (IRA) or an employer-sponsored retirement plan, you were required by law to start making withdrawals at age 70 ½. However, if you hadn’t hit 70 ½ by the end of 2019, the SECURE Act pushes out the RMD start date for most situations until age 72.

This gives additional time to allow your IRAs and 401(k)s to grow without being depleted by required minimum distributions and taxes.

Increased Savings Opportunities

Before this law, you couldn’t contribute to a tax-deductible IRA after 70 ½. But with the SECURE Act, you can. So, if you plan on working into your 70s, you can still put money into a deductible IRA. This can help you receive a valuable tax deduction and save for the future.

As many people are retiring later and more retirees are looking for ways to go back to work part-time, the SECURE Act will provide additional retirement funding flexibility for years to come.

Change to Qualified Expenses for a 529 Plan

The list of qualified expenses has now expanded under the SECURE Act. Most notably, 529 assets can now be used to pay for qualified education loan repayments (up to $10,000 lifetime maximum) and costs for an apprenticeship program.

Start Planning Now

Many of these SECURE Act rule changes require proactive planning.

It is important to speak with a qualified professional about them and your financial and retirement situation. Struble and Company Financial Life Planners are here to help you, feel free to give them a call at 931-410-3030 to set a free review of your financial life plan.

Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.