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Klingman Insights

SECURE Act: What you should know

January 13, 2020

Congress added the Setting Every Community Up for Retirement Act (SECURE Act) to a spending bill at the end of 2019. There are several items that will impact individuals in the years ahead. Here we have highlighted some of the more broadly relevant aspects of the legislation along with their potential impact on you:

Change Included in SECURE Act

Potential Implications for Individuals

· Elimination of the Stretch IRA: for any future inherited IRA, most non-spouse beneficiaries will no longer be able to take RMDs over their own remaining lifetimes (the “stretch”); rather, all funds must be withdrawn over a maximum of 10 years

· If you have already inherited IRA, this change will not affect your ability to continue to “stretch” future distributions


· For those of you with significant IRA balances, in the coming months we will explore with you potential tax/estate strategies to more effectively handle this change (e.g. Roth IRA conversions, funding life insurance, evaluating existing IRA beneficiaries)

· Required Minimum Distribution (RMD) age increasing to 72 (from 70 ½)

· If you reached age 70 ½ before year end 2019, you will be required to begin/continue taking RMDs under the old rules.


· If you have not yet reached age 70 ½, you will benefit from delaying when you must begin taking RMDs


· No Age Limit for Contributions to IRAs for Working Individuals (previously limited to age 70 ½)

· If you continue to work passed age 70 ½, you may continue to make contributions to an IRA to increase your tax deferred savings


· There continues to be no age restriction for contributing to Roth IRAs although you should make sure to discuss this strategy together with your Wealth Advisor.

· Creation of a Safe Harbor for Plan Sponsors of Corporate Retirement Plans to Offer Annuities as an Investment Vehicle

· As always, we recommend you consult with your Wealth Advisor before changing the investment allocation/selection in your 401(k), 403(b) or other corporate retirement plan accounts.

The Act has many other provisions, including a few that have received a reasonable amount of press (such as penalty-free withdrawals from IRAs of up to $5,000 to pay for the birth/adoption of a child or from 529s of up to $10,000 to pay off student debt).

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