SECURE ACT & RESA: NEW IRA RULES ON THE WAY
In this episode, John discusses two new bills that have been passed in Congress. When the SECURE Act and RESA are reconciled and become law, they will have repercussions for IRA planning.
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Don’t miss these important takeaways:
- New legislation will bring both benefits and drawbacks to retirees and beneficiaries of retirement plans. Most notable are changes to IRAs.
- The House’s SECURE Act (Setting Every Community Up for Retirement Enhancement):
- Changes the stretch (the period of time during which a non-spouse beneficiary receives payouts) from five years to ten.
- Pushes the age of required minimum distribution (RMD) from 70 ½ to 72.
- The Senate’s RESA (Retirement Enhancement and Savings Act)
- Keeps the stretch limit at five years for non-spouse beneficiaries.
- Pushes the RMD to 75.
- Possible benefit to retirees: If they push the RMD two or five years from the 70 ½, in theory, this creates more money in the qualified plan. Depending on the rules they use to calculate the RMD, that could create a higher RMD at 72 or 75.
- Possible drawbacks to non-spouse beneficiaries: They may be required to pull all of the money out over a 10-year period. If there’s more money in the IRA, it could force them into a higher tax bracket. They would pay a significantly higher tax than they’re paying now.
We’ll have to wait for the SECURE Act and RESA to be reconciled, which may happen by the end of the calendar year. In the meantime, we need to spend some time reviewing how they could impact IRA planning. We may need to rethink how you should take money out of an IRA, how it comes out, and how your beneficiaries will be impacted.
For details, listen above. For more information about this or any other aspect of wealth planning, talk to us.
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