IRA Betrayal
On December 20th the SECURE Act – Setting Every Community Up for Retirement Enhancement, was signed into law.
There went yours and my daughter’s Stretch IRA: If you recollect, under the old rules, a beneficiary, an heir, could stretch the required distributions over their lifetime. This had the effect of allowing funds to build over a lifetime with relatively small withdrawals over the heir’s lifetime.
The new rule requires heirs to empty their inherited IRA in 10 years – welcome to a tax increase. Exceptions include spouses, minor children, and heirs who are chronically ill or disabled. If the stretch IRA was part of your estate strategy, we’ll think-up something different: A Charitable Remainder Trust or similar charitable strategy or transferring more assets to a Roth IRA may help, on this later.
If you just turned 70 ½ mandatory distributions now start at 72 and if you are still employed at age 70, IRA contributions are allowed.
On the positive side of the legislation the rules have been simplified and strengthened, in my opinion, to encourage increased 401(k) plan participation by allowing pooled employer plans creating lower cost, more accessible plans. I’ve included a link to the bill if you are interested in the changes to 401(k), 403(b) and 457(b) plans.
The real question for savers, investor and planners is – what’s next? All our efforts to save and protect left at the whim of our congress. And yes, the SECURE bill was attached to the 1,700-page, $1.4 Trillion spending bill. How’s that for irony….?
Our portfolios are fully invested.
Carlos Dominguez – CERTIFIED FINANCIAL PLANNER™, Portfolio Manager, RJFS
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Sources:
https://www.napa-net.org/news-info/daily-news/secure-act-signed-law
https://www.wsj.com/articles/the-ira-bait-and-switch-11577053233?mod=opinion_lead_pos3
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