By SJS Managing Director Jennifer Smiljanich
It seems like the only constant in life is change.
Last December, President Trump signed The SECURE Act as part of the year-end 2019 spending legislation.[1]
The SECURE Act – “Setting Every Community Up for Retirement Enhancement” – shifts the existing rules on retirement saving and distributions, for both account owners and their beneficiaries.
As happens often with tax legislation, there are some people who may benefit from the changes and others who may view the changes as detrimental. We’ve highlighted some of the more significant modifications within the Act that affect your retirement planning:
The SECURE Act extends the current required minimum distribution age from 70½ to 72
If you turned 70½ in 2019, you must begin taking a minimum distribution from your IRAs and other retirement accounts no later than April 1, 2020. In a nutshell, if you reached age 70½ in 2019 or before, you must continue taking at least minimum distributions from IRAs or retirement accounts. For this group of retirees, there are no changes to the distribution rule.
The change comes into effect if you will turn 70½ in 2020 or later. If you are in this age group, you can wait until age 72 to begin taking distributions from your IRAs or other retirement accounts.
The SECURE Act allows individuals who don’t want or need the income from their retirement accounts to delay taking these distributions, and delay paying taxes to Uncle Sam. Statistically, this provision may help the 20% of retirees who take only the minimum amount required. The remaining 80% of retirees take out more than the IRS-required minimum.[2]
Interestingly, the SECURE Act still allows anyone who is 70½ to make Qualified Charitable Distributions from IRAs and avoid having the distribution count as taxable income.
The SECURE Act allows IRA contributions after age 70 if still employed
Many Americans are delaying retirement longer than ever. As of February 2019, the Census Bureau reported that about 20% of Americans over age 65 – more than 10 million people – were either working or looking for work, representing a 57-year high.[3]
The SECURE Act allows anyone who still earns income from employment, or is married to a spouse earning income, to contribute to an IRA after age 70½. Traditional IRAs had been the only retirement account that did not allow contributions to be made after age 70½.[2]
The SECURE Act eliminates “Stretch IRA” benefits for some beneficiaries
Until now, when IRA owners passed away, their beneficiaries could take distributions from those IRAs over their lifetimes. By doing so, they could allow the IRA funds to grow tax-deferred and potentially stretch out the tax liability over their lives.
Under the new legislation, when IRA owners die (any time in or after 2020), most non-spouse beneficiaries must fully distribute the IRA balance within 10 years following the year of inheritance. (The prior IRA distribution rules remain unchanged for any beneficiaries of IRAs whose original owner died prior to January 1, 2020.)
There is some flexibility, in that IRA beneficiaries who inherit this year and going forward could choose to distribute at any time during their 10-year window. Exceptions also may exist for spouses, minor children, or those with special needs or chronic illnesses.
As always, we at SJS stand ready to listen and work with you and your other professional advisors to guide you in understanding how these changes may affect your plans for the future. Please give us a call – we’re here for you, and happy to help!
Sources:
[1] “The SECURE Act.” Chairman Richard E. Neal, House Committee on Ways & Means.
[2] “SECURE Act and Tax Extenders Creates Retirement Planning Opportunities and Challenges.” Michael Kitces, www.kitces.com. December 23, 2019.
[3] “Millions of Americans are Working Past 65, and It’s Not Because They Can’t Afford to Retire.” Tanza Loudenback, Business Insider. April 29, 2019.
Important Disclosure Information:
SJS Investment Services does not provide tax advice. Please consult your tax professional for specific advice. This material has been prepared for informational purposes only.
Suggested Reading
SJS Investment Services has been recognized in CNBC’s 2024 FA 100 list, an annual ranking of registered investment advisory (RIA) firms within the USA.
SJS Investment Services has been recognized in the Forbes / SHOOK 2024 list of America’s Top RIA (Registered Investor Advisor) Firms.
Every four years, we get the same question (whether you have asked it, or you are thinking it) – how will the election affect my portfolio?
As we approach the end of the year, we want to highlight some important financial items to review before the new year.
This Outlook includes our discussion of election time, financial to-dos before the end of the year, new SJS Perrysburg office, SJS Team updates, and looking forward to Q4 2024.
SJS Investment Services has been recognized in Financial Advisor Magazine’s 2024 Registered Investment Advisor (RIA) Ranking, an annual ranking of independent investment advisory firms within the United States.
As I approach my 40th anniversary as a financial advisor, I can't help but look back on the road I've traveled.
While people commonly hold their cash within checking and savings accounts, we want to highlight three short-term, interest-bearing investments that can be held within your investment account.
This Outlook includes Founder & CEO Scott J. Savage’s gratitude for your 40 years of trust, how you can earn more interest on your cash, welcoming new SJS Team members, and looking forward to Q3 2024.
For five graduating high school Seniors who shadowed us recently, we asked each student to write a summary of what they learned during the week.
One of The Ability Center’s services is the Assistance Dog training program, which helps individuals with disabilities achieve greater independence.
When working with investment managers, we want them to share that same client-first philosophy and sit on the same side of the table with us.
We want to emphasize some best practices that can help us work together to ensure your information and assets remain safe.
The Outlook includes our evolving MarketPlus® Investing philosophy by standing on the shoulders of giants, and ways to help protect your personal information and financial assets. We also highlight The Ability Center and look forward to Q2 2024.
SRDAX is a shining example of the value alternatives can bring to traditional stock and bond strategies.
As we begin the new year, we have some ideas for concrete actions to start your new year on the right foot, financially.
Isn’t this picture magical? It's Main Street in Sylvania, Ohio, the small town where I founded SJS over 28 years ago!
The SJS Q4 2023 Outlook includes our insights on small town values, MarketPlus® Investing, and planning financially for the new year. We also highlight new SJS Team members and look forward to Q1 2024.
To help you financially plan for 2024, we provide this resource with important numbers for the upcoming year.
SJS Investment Services has been recognized in the Forbes / SHOOK 2023 list of America’s Top RIA (Registered Investor Advisor) Firms.
In addition to family gifting, many individuals support giving to organizations that aim to help their communities. We highlight some strategies to make the most of your giving dollars.
You can consider putting excess cash into a money market fund, short-term U.S. Treasury bonds, or a short-term bond mutual fund / ETF.
The future of the housing market is uncertain, and its resilience will be a crucial factor in the broader economic landscape.
The SJS Q3 2023 Outlook includes our insights on gifting and charitable contributions as well as U.S. real estate. We also look forward to Q4 2023.
SJS Investment Services has been recognized in CNBC’s 2023 FA 100 list, an annual ranking of registered investment advisory (RIA) firms within the United States.
International Samaritan is a 501(c)(3) nonprofit organization that is working to break the chains of poverty and improving lives, particularly within garbage dump communities worldwide.
SJS has been recognized in Financial Advisor Magazine’s 2023 Registered Investment Advisor (RIA) Ranking, an annual ranking of independent investment advisory firms within the United States.
The SJS Mission is to empower you to build a better life. That extends to our teammates, clients, and community members.
The SJS Q2 2023 Outlook includes our insights on building up our local communities as well as market performance so far in 2023. We also share even more members of the SJS family and look forward to Q3 2023.
It’s important to recognize how difficult it is to predict what will happen in the short-term for investment markets, and how much margin for error there should be for any prediction.