How The SECURE Act Will Change Your Retirement


The SECURE Act, which was
signed into law in December, 2019 is the biggest piece of retirement
legislation from the last decade. If you are nearing retirement
or already retired, then this will impact you. Hi there, my name is Ashley Micciche I’m the CEO
of True North Retirement Advisors where we specialize in retirement and
exit planning for business owners. Okay. So the first major
provision of the secure act, which I love the acronyms, the secure act stands for
setting every community up for, Oh, I don’t even know for
retirement enhancement, something along those
lines. But the secure act, which was signed into
law in December of 2019, one of the main provisions that I
actually really like about these new rules around IRAs and 401k accounts is that
you no longer have to start taking your required minimum distributions
at age 70 and a half. You can start taking them at 72. Let’s say you retire at 65 and
you are taking money out of your, individual accounts, your non IRA accounts to support your
lifestyle and income needs in retirement. Chances are once you retire, but before you take your
required minimum distributions, your income’s probably going to go down. And that’s a big deal because it opens
up this new longer window between retirement and the drop of your income
and when you have to start taking those required minimum distributions. So it’s really important in that
window that you look seriously at Roth conversions in your IRA accounts
and see if that makes sense for you. Because if it does, if you’re able to,convert money to a
Roth and not pay a boatload in taxes for doing so, which hopefully if
your income has gone down there, there’s more of an opportunity there to
do that. But if you’re able to do that, it lowers the total amount
that’s in your IRA account, that now shrunk. So on an ongoing basis, when you turn 72 and you have to
start taking those required minimum distributions, the amount, the mandatory amount is now
based on a smaller amount, which means that your taxes on those
amounts because you have to pay taxes on the withdrawals, you potentially lower the taxes on future
withdrawals by not having to start as early and by taking advantage of some
other opportunities that exist there. The other thing I like about it is it
just offers a lot more flexibility and freedom now that you’re not mandated
to start taking withdrawals. They extended it another year
and a half basically. Okay. The second piece of this secure act
that I think is going to be pretty wide sweeping is that you can continue to
make contributions to your IRA account after age 70 and a half as
long as you’re still working. So you used to have to stop at age
70 and a half no matter what, even if you’re still working.
But, but as we all know, a lot of us can work into our seventies
and a lot of people will work into their seventies. And so the beauty of this is
that as long as you are still working, you can contribute to an IRA. And the other thing why this is relevant
is that it kind of cleaned up the rules around, the differences between
401k rules and IRA rules. Because in 401k, if you’re still covered
by a 401k, you could have continued. You’ve, you’ve been able to continue
making contributions past
age 70 and a half as long as you are still working. But then
the rules for the IRA accounts, which is a very similar
account type were different. So it kind of cleaned that up and brought
them into cohesion together and made it a lot easier to understand. I think.
So as long as you’re still working, there’s no more age cap on making
IRA contributions, which is really, really nice. This is probably the biggest piece of
the secure act that’s going to impact the most people because if you have a large
IRA and you die and you still have money in that large IRA and let’s say it goes
to your spouse and then your spouse withdraws money and then he or she dies and there’s
still a lot of money then for most people the beneficiary then is
their kids. Under the new rules, your children will only have 10 years
to fully distribute and cash out the IRA account. Here’s the problem with that. Most people end up inheriting
money in their peak earning years. So you’re probably in your 50s or 60s
when you inherit mom or dad’s IRA account. The problem with this, especially if you
have a large IRA, let’s say you have, you inherit that half a million dollars
IRA or maybe it’s higher than that. You now have 10 years to fully distribute
and pay taxes on a half a million dollars. So you’re looking at
potentially increasing your
taxable income by $50,000 a year. So tremendous impact on the taxation
and the estate planning piece of it. If you have a large IRA, and
I would consider a large IRA, basically anything over
a half a million dollars, it would be very wise and
even if it’s less than this, but it would be very wise
to talk to your tax advisor, talk to your estate attorney,
because there are strategies, there are things you can do
to minimize the tax impact. And one of the suggestions, and one of the strategies that
I read about just today was, let’s say you have IRA assets, but then
you have these other assets over here. And so one of the strategies might be, giving the child with the lower income, the IRA assets because it’s not going to
impact them as much and then giving the other child with the higher
income, the taxable account assets. And there’s ways when you work with your
tax advisor and your estate attorney to kind of figure out how
that all balances out. If you have an existing inherited IRA, don’t panic because these
rules, the old inherited rules, which were much more lenient, they allowed you to stretch the
distributions over your remaining life. In a lot of cases, those are still in effect if you
have an existing inherited IRA. So my understanding is that if the
primary account owner of the IRA, they have to have died in January 1st
of 2020 or later in order for these new rules to apply, if they passed
away last year under the old rules, then you’re grandfathered in.
Thank you so much for watching. Be sure to tune in next time where I’m
going to dive a little bit deeper into the RMD at age 72 rule and talk about
some additional planning strategies that you can take in order to help maximize
this new benefit of the secure act. So if you are nearing retirement, if you are in your 50s and 60s and getting
pretty serious about wanting to plan and make smart decisions
for your retirement, be sure to click on the button below
where you can subscribe to this channel. I put out new videos about three times
a month focused on retirement and exit planning, especially for business owners.
So thank you so much for watching. My name is Ashley Mitcciche
and I will see you next time!

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