What is the SECURE Act and How Does it Affect My Retirement?

A new law could have big impacts on your personal retirement planning options. Having a relationship with an estate planning law firm in Pasadena means that you’ll be kept up to date with any statewide or federal changes in tax laws and estate laws that might require you to update your documents and plans.

The biggest change in the SECURE Act is that “stretch” IRAs would be eliminated. Prior to this new law, if you chose to pass on your IRA to someone other than your spouse, that beneficiary got to choose if they want to stretch out the receipt of those benefits over their lifetime and then pass on the remainder to their own heirs.

The required minimum distributions on those stretch IRAs were based on the life expectancy of the first beneficiary. The big advantage of taking this route was that the money inside the account could accumulate on a tax-deferred basis over the beneficiary’s life. However, under the SECURE Act, that first beneficiary has to withdraw all money in the IRA within no more than 10 years of the original account owner’s death.

For plenty of beneficiaries, this is a big issue that requires some advanced planning because those withdrawals would happen during the recipient’s highest earning years. That means more taxes to be paid.

A few other implications of the new law worth talking over with your attorney and financial advisors include:

  • RMDs can be extended to age 72 for those recipients who are not 70 ½ by the end of 2019
  • Workers can still contribute to their IRA after age 70 1/2
  • If you own a business, you should discuss the tax credit for starting a retirement plan
  • An early withdrawal of up to $5,000 can be taken out without a paid penalty in association with the adoption of or birth of a child

Already have an estate plan but need to know how this changes your current retirement planning? Need to set up your estate plan and want to ensure you maximize the benefits for your heirs? Our Pasadena estate planning office is here to help you.



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