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How will the SECURE Act impact your retirement accounts?

Feb 21, 2020 | Kerrigan Mahoney Group


The SECURE Act mandate that most non-spousal beneficiaries deplete an IRA within 10 years of inheriting could have a big impact.

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We’ve all heard it said, there’s no time like the present. That’s especially true when considering a ROTH conversion now with the December 2019 passage of the SECURE Act.

For many, an IRA or a 401K rollover is their retirement “paycheck,” with the rest of the needed income coming from Social Security benefits. In retirement, you can choose to take only what is required via a yearly Required Minimum Distribution (RMD) or use up to $100,000 of that distribution per year as a direct charitable gift (thereby avoiding income tax on that portion of the distribution). Increasing the age at which RMDs begin is one of the key changes of the new legislation. Anyone who turned 70 after July 30, 2019 can now defer the start of their distributions until after they turn 72.

In the past, a non-spouse beneficiary of these accounts could stretch the required distribution over a number of years, based upon the age they inherited this asset. The passage of the SECURE Act changed all that. The new requirement dictates that the vast majority of non-spousal beneficiaries deplete the IRA in no more than 10 years after inheriting.

Given the balances of many retirement accounts we see, those withdrawals could have an unwelcome impact by increasing a beneficiary’s tax bracket during their high earning years--with the net result of receiving less from the retirement account they inherited than previously anticipated or intended by the benefactor.

With some thoughtful planning now, there are ways to mitigate this impact for your heirs:

  • This is a perfect time to talk with us and your accountant to come up with a plan to convert some or all of a traditional IRA to a ROTH IRA for the next four years.
  • The lower tax rates implemented a year ago are due to sunset in 2024, with the expectation that current rates will rise. We can work with you on a strategy for annual conversions over this time period.
  • It has always been important to review the beneficiaries of your retirement accounts, and the SECURE Act makes it even more so.  Reviewing exactly how beneficiaries are listed in your documents can make a significant difference in what they ultimately receive.

If you could like to discuss how the SECURE Act make impact your retirement accounts, please reach out to us to discuss your unique needs and how we can be of service to you.


Wealth planning