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SECURE Act Provisions

Sam Payne, RICP, CLTC – Vice President, Business Consultant
(Asset Marketing Systems)

December 20th of 2019, president Trump signed into law the “Setting Every Community Up for Retirement Enhancement Act” or the SECURE Act.  I see this Act as an effort to make sure American Retirees have the tools available to do exactly what retirement accounts are intended to do, provide income.  Annuities, and the guaranteed income they provide, can play a pivotal role in the success of a retiree’s income plan.  When Americans enter that permanent state of unemployment, called retirement, these products can and do help provide the paycheck or income needed to meet normal as well as emergency expenses. 

In addition to offering a safe harbor provision allowing annuities in 401K plans, the act makes substantial changes to the RMD age as well as the ability to contribute to an IRA after 70 ½. To pay for these benefits, it seems, the act also dealt a death blow to what is known as the “stretch” or “multi –generational” IRA.  Non-spousal IRA’s must now be liquidated within 10 years of the owner’s death.

This Act became law on Jan 1st 2020.  Below I highlight some key provisions of the act and provide five solutions and opportunities.

Key Takeaways:

  • Repeals the maximum age for traditional IRA contributions, which is currently 70½.
  • Increases the required minimum distribution (RMD) age for retirement accounts to 72 (up from 70½).
  • Allows long-term, part-time workers to participate in 401(k) plans.
  • Offers more options for lifetime income strategies by providing a Safe Harbor provision allowing plan sponsors to include Annuities in 401K plans.
  • Permits parents to withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption for qualified expenses.
  • Allows parents to withdraw up to $10,000 from 529 plans to repay student loans.

Here are 5 Solutions and Opportunities to Consider:

  1. Re-Evaluate Beneficiaries
  • Spousal rollovers can be more valuable for tax-deferral
  • If you listed a trust as a beneficiary, review immediately
  1. Tax Bracket Management
  • Maximize low tax brackets
  • Qualified Charitable Distributions if you are charitabily inclined
  1. Examine Roth Conversions
  • Current lower rates under the Tax Cuts and Jobs Act are scheduled to sunset after 2025
  • Those close to RMD age have an additional 2 years from ROTH conversions
  1. Life Insurance as an estate and tax planning vehicle
  • Can replace all of the benefits of a stretch IRA and IRA trusts
  • Less tax for beneficiaries
  1. Avoid Trust Tax Rates by All Means
  • Highest trust tax rate at present is 37% for income over $12,950
  1. Highlight the benefits of FIA’s and their income riders 
  • Show those close to retirement that annuities are already available outside their 401K
  • Illustrate income that can be generated at their retirement age

Download the SECURE Act Summary PDF

These are some suggestions, and as always reach out to your Business Consultant here at AMS with any questions, comments or concerns you may have.