In December, President Trump signed the new SECURE Act. After taking effect Jan 1st, the SECURE legislation – which stands for Setting Every Community Up for Retirement Enhancement – is changing the landscape of planning for retirement.
The good news is that the act involves some taxpayer friendly changes, including:
- The maximum age for traditional IRA contributions has been repealed. This means that taxpayers can continue to contribute to traditional IRAs past age 70.5 as long as they have earned income.
- To account for the many taxpayers who are working and living longer, the age for required beginning date of mandatory distributions has been increased for most people from age 70.5 to 72.
To pay for these good changes, the “bad news” is the removal, for most non-spouse beneficiaries, of the option to spread distributions over the life expectancy of the beneficiary (the so-called ”stretch”), which allowed for the deferral of income taxes on plan proceeds and maximization of tax-free compounding while the funds remained inside the account. Complete distribution must now be made within 10 years of the plan participant or owner’s death.
How does the SECURE Act affect you?
In light of these sweeping changes, we urge everyone with a retirement account to review their beneficiary designations and estate planning documents, especially plans naming a trust as beneficiary. If you have questions about how these and other elements of the SECURE Act will affect you personally, now is a good time to confer with your estate planning attorney or other trusted advisor to determine how to best stay on track with your goals.