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SECURE Act: What does it mean for you?

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The SECURE Act was signed into law on Friday, December 20, 2019. Since this law will impact anyone with retirement accounts, we wanted to provide our clients and valued partners with a summary of key provisions. As always, we will work with our clients to manage the impact of such changes.

In summary, the recently passed bill includes the following:

  • The required IRA distribution age increases from 70.5 to 72. This applies to anyone who has not reached the age 70.5 by 12/31/2019. If you are 70.5 at the end of 2019, your required distributions are not delayed until age 72.
  • Contributions to traditional IRAs will now be allowed past age 70.5, which aligns with the rules for both 401Ks and Roth IRAs. This change is effective for contributions after December 31, 2019.
  • Elimination of the “Stretch IRA” – Most non-spousal beneficiaries of retirement plans (including 401K plans, IRAs, and Roth IRAs) will be required to distribute the entire account by the end of the 10th calendar year following the year of the account owner’s death. There will be flexibility in terms of how the funds are withdrawn as long as the funds are completely distributed by the end of the 10-year period. If the funds are not withdrawn by the deadline, a 50% tax penalty would be assessed on the remaining balance. This change is effective for retirement accounts where the account owner passes after 12/31/2019.
    • This change in the distribution methodology for retirement accounts could present a problem if a trust or a minor is named as a beneficiary. Reviewing your estate plan with your planner and estate planning attorney will be an important planning discussion in 2020. 
  • A few provisions from the Tax Cuts and Jobs Act of 2017 (2017 Act) that were set to expire are being extended as part of the Extenders Bill that was voted on at the same time as the SECURE Act. One such item is the deduction for qualifying medical expenses.  The 2017 Act allowed deductions for qualified medical expenses above 7.5% of adjusted gross income (AGI).  This was set to increase to 10% of AGI in 2019. However, the Extenders Bill will keep the limit at 7.5% for 2019 and 2020.
The F&M planning team is currently working to understand the implications of the SECURE Act and how this will impact our clients. We are also reviewing the changes with estate planning attorneys to coordinate efforts with serving our clients. If you have immediate questions or concerns, please contact your advisor.