The SECURE Act may affect your retirement and your legacy planning.
Last week, reports indicated the ‘Setting Every Community Up for Retirement Enhancement’ (SECURE) Act was attached to the federal spending bill President Trump signed into law on Friday.
The SECURE Act is intended to expand retirement savings opportunities. Many of its provisions make it easier for Americans to save more for retirement and, also, to convert their savings into income for retirement. The Act will change IRA rules in some significant ways. For instance, Drinker Biddle and Barron’s reported:
• Contribute to IRA accounts at any age. In the past, Americans had to stop contributing to IRAs at age 70½. • Begin taking required minimum distributions (RMDs) at age 72. The age for RMDs was pushed to 72 from age 70½.
The Act also changes post-death IRA distribution rules, eliminating stretch IRA estate planning strategies. Barron’s explained, “Under the bill, beneficiaries of an IRA would need to draw down the account - and pay income tax on the money - over a decade, rather than a lifetime.” This will affect some legacy planning strategies and necessitate the adoption of alternative solutions.
Workplace plans may change, too. Part-time workers are now eligible to participate in defined contribution plans as long as certain criteria are met. The Act also made it easier for defined contribution plans of all sizes to add lifetime income options to plan investment lineups.
In addition, the incentive for smaller business owners to establish workplace retirement plans increased. Tax credits, of up to $5,000 for three years, can be claimed to offset plan start-up costs. Additional tax credits are possible when new plans include automatic enrollment features or existing plans add automatic enrollment features.
If you would like to discuss how the SECURE Act may affect your retirement, business, or legacy plans, please give us a call.