MCF Insights: The SECURE Act – How Your Retirement Could be Impacted
By: Brittany Manning, CPA, CFP®
Vice President, Finance / Wealth Manager
Qualified savings, money held in retirement plans, such as 401(k)s and IRAs, are a large part of most families’ plans for their retirement years. Legislation that has passed the House and is currently in debate in the Senate, called the SECURE Act, proposes some changes to retirement savings, both during your working years and during retirement.1
First, the SECURE Act has proposed changing ages for the required minimum distributions to begin. As the laws are today, upon reaching 70 ½ (in most circumstances) individuals are required to begin withdrawing money from these accounts, regardless if there is a need to do so financially or not. The government has mandated these withdrawals so individuals begin to pay tax on the money they were able to save and defer tax on for so long. Under the SECURE Act, this age would change from 70 ½ to 72. This allows those assets inside the retirement accounts to continue to realize tax free benefits for an additional 18 months.2
A major proposal of the SECURE Act impacts Inherited IRAs, those retirement accounts that pass to someone other than your spouse. Under current rules, these Inherited IRAs are allowed to be distributed, or “stretched”, over the life of the beneficiary. This allows for the assets to continue to grow tax free for what can be an extended period, based on the age of the beneficiary. The SECURE Act has proposed limiting this time period to 10 years, requiring all assets to be distributed from Inherited IRAs in that time frame, and the applicable taxes be paid on the distributions.3
Other notable changes from the Act include allowing more part-time workers to participate in 401(k) plans, allowing penalty free withdrawals from retirement plans for qualified birth and adoption expenses, as well as allowing for contributions to Traditional IRAs past the current age of 70 ½. 3
These proposed changes could have a large impact on the Financial Plans of almost all Americans, including their Estate Plans. Our team is closely watching the legislation, and if the bill passes, we will be ready to act accordingly.
If you have any questions on the SECURE Act, please reach out to a Consultant today.
1https://www.planadviser.com/exclusives/secure-act-ensnared-senate-flying-house/
2https://money.usnews.com/money/retirement/iras/articles/what-is-the-secure-act
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