What is it? How might it affect retirement strategy?
Provided by Mark K. Lund, Investment Adviser
If you follow national news, you may have heard of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Although the SECURE Act has yet to clear the Senate, it saw broad, bipartisan support in the House of Representatives and could make IRAs a more attractive component of your retirement strategy. However, it also changes the withdrawal rules on inherited “stretch IRAs,” which may impact retirement and estate strategies, nationwide. Let’s dive in and take a closer look.1
Secure Act Consequences. Currently, those older than 70 ½ must take withdrawals and can no longer contribute to their traditional IRA. This differs from a Roth IRA, which allows contributions at any age, as long as your income is below a certain level: less than $122,000 for single filing households and less than $193,000 for those who are married and jointly file. This can make saving especially difficult for an older worker. However, if the SECURE Act passes the Senate and is signed into law, that cutoff will vanish, allowing workers of any age to continue making contributions to traditional IRAs.2
The age at which you must take your Required Minimum Distributions (RMDs) would also change. Currently, if you have a traditional IRA, you must start taking the RMD when you reach age 70 ½. Under the new law, you wouldn’t need to start taking the RMD until age 72, increasing the potential to further grow your retirement vehicle.3
As it stands now, non-spouse beneficiaries of IRAs and retirement plans are required to withdraw the funds from its IRA, tax-sheltered status, but can do so by “stretching” the disbursements over time, even over their entire lifetime. The SECURE Act changes this and makes the use of “stretch” IRAs unlikely. Under the new law, if you leave a Traditional IRA or retirement plan to a beneficiary other than your spouse, they can defer withdrawals (and taxes) for up to 10 years max.4
What’s next? Currently, the SECURE Act has reached the Senate, where it failed to pass by unanimous consent. This means it could move into committee for debate or it could end up attached to the next budget bill, as a way to circumvent further delays. Regardless, if the SECURE Act becomes law, it could change retirement goals for many, making this a great time to talk to an investment adviser.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Stonecreek Wealth Advisors, Inc.
11650 S. State Street, Suite 360
Draper, UT 84020
1 – financial-planning.com/articles/house-votes-to-ease-rules-for-rias-correct-trump-tax-law [5/23/19]
2 – irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2019 [6/18/19]
3 – congress.gov/bill/116th-congress/house-bill/1994 [5/16/1900]
4 – law.com/newyorklawjournal/2019/04/05/what-to-know-about-the-2-big-retirement-bills-in-congress/ [4/5/19]
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by MarketingLibrary, Inc., for Mark Lund, Mark is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Advisor, Financial Planner and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment and retirement planning for individuals and 401k consulting for small businesses. Cities served include but not limited to are: Salt Lake County, Park City, Salt Lake City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland City, Alpine City, American Fork City, and Utah County in Utah.