New legislation signed into law is bringing some of the biggest changes to retirement planning in years.
The Setting Every Community Up for Retirement (or SECURE) Act became effective on January 1, and it could certainly affect many of you who are retirement savers, for better or worse.
A recent Forbes article highlighted several considerable changes:
• The new law essentially ends the use of a “stretch” Individual Retirement Account (IRA) as an estate planning tool. The stretch IRA is a technique in which a beneficiary would extend distributions from an inherited IRA over his or her lifetime.
• The SECURE Act now allows for individuals to contribute to their traditional IRAs without any age restriction. Previously, contributions were not allowed past age 70½.
• An age restriction on when required minimum distributions (RMDs) must begin was raised from age 70½ to 72. However, the new rule does not apply to those individuals born on or before June 30, 1949.
• The law also put in new employer protections for offering annuities. It protects employers from liability when selecting an insurer. We expect to see more businesses offering these popular options.
Next Steps
Contact our office to perform a thorough review of your retirement account beneficiary designations and related estate plan documents.
If you named a trust as a beneficiary, we suggest meeting with us to review the trust’s provisions and determine if changes must be made to the trust or to the beneficiary designations.
Likewise, if individuals are named as the beneficiaries, you need to make sure that the current designations are aligned with your planning goals and the new law.
Considering the new law and its effect on your planning goals, there are other estate planning strategies that are worth considering, such as:
• Designating charities as beneficiaries for all or a portion of your retirement accounts;
• Creating a Charitable Remainder Trust.
Although these changes might provide a few tax-saving opportunities, some of the modifications are not positive. However, there may be steps you can take to minimize their impact.
If you have questions about the SECURE Act and its implications on your estate and retirement planning, please contact us.