Happy new year and new decade!

Lost in all the festivities of the holiday season were some significant changes that Congress made to retirement plans. These were included as a part of their December 20th spending package. The official name of the House of Representative’s Act is the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

While some of the components of the Act are certainly positive for enhancing Americans’ retirement security, one change made by the Act is anything but an improvement. Previously, non-spouse beneficiaries of retirement plans and IRAs were required to withdraw a minimum amount from the account each year over a time period approximately equal to their life expectancy at the time of receiving the inheritance at which point the account would be fully depleted. With the new law, retirement plans and IRAs inherited after January 1, 2020 must generally be fully withdrawn by the beneficiary within 10 years of the death of the IRA owner. Seeing as distributions from retirement plans and traditional IRAs are typically fully taxable as income, what this means is that people who inherit IRAs from their parents, grandparents, aunts, uncles and the like will likely be losing much more of their inheritance to income taxes than they would have under the previous rules. This could especially impact beneficiaries who are still working, resulting in a high tax rate on the forced distributions. So much for improving Americans’ retirement security.

On the plus side, retirement plan and IRA owners are now not subject to required minimum distributions from their own account until the year in which they turn 72. Previously the age at which this took effect was 70 ½. One other notable positive change from the Act is working Americans with earned income can now fund traditional and Roth IRAs regardless of their age. Previously these accounts could not be funded once the IRA holder turned 70 ½.

There are other specifics and provisions as a result of the SECURE Act . If you would like further information or if you would like to discuss these changes, do not hesitate to reach out to me.

Glenn S. Rank, CIMA®

Certified Investment Management Analyst®

President