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Your Time, Your Money: 3 Ways the SECURE Act May Affect You

by Jason Priebe   ·  Jan 16, 2020  

As you may know the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019. This piece of retirement legislation could have an impact on decisions you may want to make regarding your Wealth Planning strategy. As a Wealth Advisor, we understand that sifting through legislative updates can be time-consuming. In this segment of our Your Time, Your Money blog, we hope to help you sort through the mess by covering the three key provisions we believe could have the biggest effect on you.

1. Post-70 ½ IRA Contributions

Prior Law

Currently, an individual who is 70 ½ by the end of the year may not make a non-rollover contribution to a traditional IRA. Also, IRA owners who are 70 ½  may direct tax-free distributions (qualified charitable distributions) of up to $100,000 per year from an IRA to a qualified charity or charities. 

SECURE Act Provision Summary (New Law)

The limit prohibiting individuals, age 70 ½, from making non-rollover contributions to traditional IRAs is repealed. As for qualified charitable distributions, this exclusion has been reduced (but not below zero) by an amount equal to the excess of:

  1. All IRA deductions allowed to a taxpayer for all taxable years ending on or after the date the taxpayer attains age 70 ½; over
  2. All reductions to the exclusion based on post- 70 ½ IRA deductions for all taxable years preceding the current taxable year.

The Simplified Version

If you are over the age of 70 ½ you can now make tax-deductible contributions to your IRA if you have earned income (employment income). Prior to this change once you turned 70 ½ you could no longer make tax-deductible contributions to your IRA.

2. Increased Required Beginning Date

Prior Law

Required minimum distributions (RMDs) generally must begin by April 1 of the calendar year following the calendar year in which the individual (employee or IRA owner) reaches age 70 ½, subject to an exception for certain plan participants. This deadline is called the “required beginning date.”

SECURE Act Provision Summary (New Law)

The SECURE Act increases the age triggering the required beginning date for RMDs for retirement plans and IRAs to 72.

The Simplified Version

You now get a reprieve from when you are required to take distributions from retirement accounts (IRA, 401K, etc) to the age of 72, prior to this change you needed to begin taking RMDs at 70 ½.

3. Inherited IRAs

Prior Law

In the past, the beneficiary of an IRA or retirement account could stretch the distributions over the beneficiary’s life expectancy (with certain exceptions).

SECURE Act Provision Summary (New Law)

The beneficiary of an IRA or retirement account will now be required to distribute 100% of the assets within 10 years of inheriting the account with a few exceptions.

Significantly, the 10-year rule does not apply to any portion payable to an “eligible designated beneficiary” if such portion will be:

  1. distributed over the beneficiary’s life or a period not exceeding his or her life expectancy, and
  2. such distributions begin within one year of the death

An eligible designated beneficiary is any designated beneficiary who is:

  • The surviving spouse
  • A child under the age of majority
  • Disable or chronically ill
  • Any other person who is not more than 10 years younger than the participant/IRA owner

In the case of a child who has not attained the age of majority, the 10-year rule applies as of the date the child reaches the age of majority. The 10-year rule will also apply upon the death of any eligible beneficiary.

The Simplified Version

Prior to this law change, most beneficiaries of an IRA could stretch the distributions over their life expectancy. Under the SECURE Act, most beneficiaries will now be required to distribute all of the assets from a retirement account within 10 years of inheriting the account. This is subject to a few key exceptions, including a spouse, minor child, disabled person, or anyone who is within 10 years of the deceased age. This change is perhaps the most impactful of all because it can greatly reduce the amount of after-tax inheritance someone may receive. If you have a significant amount of assets in retirement accounts it may be important to review your current plan to determine if any changes should be made to your current strategy to maximize the after-tax inheritance your beneficiaries will receive.

Wrap Up

Even, in summary, the amount of new information can be overwhelming for most. As wealth advisors, we’re here to help you possibly find the answers you need. Please feel free to contact us if you would like to discuss how these changes may impact you.

A few other key provisions include:

  • Open Multiple Employer Plans / Pooled Employer Plans
  • Safe Harbor 401(k) Plans and Timing of Plan Amendments and Adoptions
  • Startup Credit for Small Employer Plans and New Credit for Small Employer Plans Adopting Automatic Enrollment
  • Long-Term Part-Time Employees
  • Plan Withdrawals for Birth or Adoption
  • Consolidated Form 5500 Reporting for Similar Plans
  • Fiduciary Safe Harbor for Selecting Annuity Providers


**This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.