Signed into law by President Trump on December 20, 2019, the “Setting Every Community Up for Retirement Enhancement Act”, also known as the Secure Act, is intended to increase access to tax-advantaged retirement accounts, helping older Americans in retirement and encouraging employers to offer 401(k) plans.
The new act, which went into effect on January 1, 2020, affects IRAs, 401(k) plans, and other retirement accounts.
The Secure Act has made several changes related to tax advantaged accounts:
Another change is the removal of the stretch IRA, which is estimated to raise $15.7 billion in tax revenue. This rule allowed non spouses who inherited an IRA to stretch the disbursements over their lifetime. With the new rule, non spouses who inherit an IRA will be required to take a full payout from the account within 10 years of the original account owner’s death, beginning with account holders who die in 2020. With the changes to inherited IRAs, it will be important for account owners to review their estate plans and the potential tax consequences.
While it will take time for the jury to come in on whether the Secure Act will make positive changes in helping Americans save for retirement, many financial experts appear to be optimistic and believe it is a step in the right direction. As expected, other experts feel it will have a limited impact on saving.
One thing experts can agree on is that Americans are currently not financially prepared for retirement, and changes are needed to put people on the path toward financial security. Hopefully, the Secure Act is the impetus for that change. Please call if you’d like to discuss this in more detail.
If you have any questions regarding The Secure Act, contact us.