{"id":283,"date":"2020-01-08T00:00:00","date_gmt":"2020-01-08T00:00:00","guid":{"rendered":"https:\/\/www.retirementrefined.com\/index.php\/2020\/01\/08\/confused-on-the-secure-act-read-this\/"},"modified":"2020-01-08T00:00:00","modified_gmt":"2020-01-08T00:00:00","slug":"confused-on-the-secure-act-read-this","status":"publish","type":"post","link":"https:\/\/www.retirementrefined.com\/confused-on-the-secure-act-read-this","title":{"rendered":"Confused on the Secure Act? Read this!"},"content":{"rendered":"

SECURE Act is Official!<\/strong><\/p>\n

\u201cSetting Every Community Up for Retirement Enhancement\u201d<\/em><\/strong><\/p>\n

After months of speculation the SECURE Act is now official.\u00a0 There are several parts to the SECURE Act; however I will summarize the main provisions that will impact our clients, prospective clients and additional blog readers.<\/p>\n

Required Minimum Distributions (RMD\u2019s)<\/strong><\/p>\n

Prior to the SECURE Act, the age required for your first Required Minimum Distribution (RMD) was the year you turned 70 \u00bd.\u00a0 If you turn 70 \u00bd in 2020 or later the new age requirement for<\/strong> your first RMD will be age 72.<\/strong>\u00a0\u00a0 If you turned 70 \u00bd prior to 2020, the old rules will continue to apply.<\/em><\/p>\n

You will still have the option to delay your first (age 72) required minimum distribution until 4\/1 of the year AFTER you turn 72.\u00a0 If you elect this delayed strategy, you will then need to take 2 distributions the following year.\u00a0 You will need to distribute your age 72 distribution by 4\/1 and your age 73 distribution by 12\/31.<\/p>\n

The positive is you may have an additional year to complete Roth IRA conversions which should actually lower your RMD at age 72 and older.\u00a0 If you elect to employ this strategy, it\u2019s critical you work with a qualified, experienced advisor as conversions can cause other ancillary negatives for income taxation and Medicare premiums.<\/p>\n

The slight negative in my opinion; suppose the markets continue their upward decent and you do not take a distribution until required at age 72.\u00a0 Your account balance will be larger which will increase the dollar amount required to fulfill your RMD.\u00a0 This can push you into a higher marginal bracket (minimal impact), however could increase your Medicare Part B and D premiums which is problematic.<\/p>\n

\u201cSTRETCH IRA\u201d Significantly Revised<\/strong><\/p>\n

Prior to passage of the SECURE Act, a NON-SPOUSE beneficiary was able to \u201cstretch\u201d distributions over their life expectancy.\u00a0 We have many children who have inherited IRA\u2019s from their parents who are employing this strategy which can enable the funds to last a lifetime while still providing annual distributions.<\/p>\n

For designated beneficiaries who inherit a retirement account in 2020 and beyond the new standards is the \u201c10-Year Rule\u201d.<\/p>\n

Under the 10 Year Rule, the entire inherited retirement account must be emptied by the end of the 10th<\/sup> year following the year of inheritance.\u00a0 Prior to the end of the 10th<\/sup> year, there are NO distribution requirements.<\/p>\n

For example, a 50 year old inherits and IRA from their parent.\u00a0 Under the old rule, the 50 year old would be required to take required minimum distributions over an approximate 34 year period, providing opportunity for significant tax-deferral.\u00a0 Under the new rule, the tax-deferral benefit is for just 9 years whereas the account must be fully liquidated by end of the 10th<\/sup> year.<\/p>\n

Because of the change, a tax discussion is imperative to determine how to distribute the funds over the shorter time period.<\/p>\n

There are some exceptions however.\u00a0 The new rule does NOT apply to:<\/p>\n