Secure Act and the 10 Year Requirement


Hi, this is Brad Bob, with Bob Financial, and I want to do a third
video on the Secure Act. So, we all know that Secure Act has ended the Stretch IRA, by now. So, can no longer stretch
an IRA that’s passed on over your lifetime. And it has to be taken out in ten years. So, the question that’s
come up is, “Okay, I know that I have to have it all
taken out by the end of ten years, but what do I
have to do in the meantime? So, this year, next year, do
I have to take out RMD’s?” And the answer is, no. You don’t have to take out RMD’s. So, the rule says that you
have to deplete the account by the time that ten years is up. Therefore, you don’t
have to take anything out until year ten if you don’t want to. Or, I guess the end of the ninth year. So, that brings up some
planning questions. So, what do you do? If it’s a Roth IRA that’s passed on odds are that you’ll want
to leave that money there if you can afford to do that. Leave that money there and
let it grow income tax free over the next ten years. That way the money has ten
years of being able to compound income tax free. However, if it’s an IRA you may want to do something different. So, the problem with an IRA
is if you wait until the last year. You know, say it’s $200,000 today and you wait until the tenth year, well, if you use the
rule of 72 and you get 7.2% on that money over
the next ten years, it’s gonna double to $400,000
by the end of ten years. So then, if you take that
$400,000 out on the last day before the tenth anniversary
comes up, that’s gonna be $400,000 of income. And that’s probably not a good thing because your gonna loose a lot of money to income taxes if you do that. So, if it’s a traditional IRA you’re gonna need to do some planning. If you have low tax years, you know, if your taxable income fluctuates, if you have lower tax years, you may want to take more out that year. But you probably want
to spread distributions from an IRA or qualified
account. You probably want to spread those out over a number of years verses taking those out in one year. So, again, the Roth
IRA, probably beneficial to wait as long as you can
to take money out of that because that’s not gonna have any impact on your taxable income. Traditional IRA, do some
planning, figure out what the best strategy is. Maybe take a little bit out
every year over the ten years. Maybe wait for the last five years. Maybe the last three years. If it’s not a large
amount, or it’s not gonna impact you, impact your income taxes, then maybe you can wait
’til the last year. So, that’s it, I think. That’s
all I have on the Secure Act. I hope that helped. Until next time. This is Brad, Bob Financial.

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