Getting SECURE: Part 6
By Gary Silverman, CFP®
This is the sixth and final article in my series on the SECURE Act. We’ve discussed, among many of its features:
- Change in IRA Required Minimum Distributions (RMDs) starting from age 70-1/2 to age 72
- The change for Beneficiary IRAs from a lifetime “stretch” to the 10-Year Rule
- The ability to contribute to your Traditional IRA past age 70-1/2.
The thing to remember is that while I’ve covered what I think are the biggest changes to the widest reading audience, what you’ve read is only a small amount of the Act. Then there’s the fact that the Act lays out what changes are to be done. The specifics as to how that is actually done is what the Treasury Department (via the IRS) will be spending countless hours and an awful lot of words defining.
Then there’s the issue that I don’t know you. So, when I say things like “there are exceptions” I don’t know if you are the exception or not. Bottom line, as always, use this series merely as the start of your learning and start talking to your tax, legal, and financial professionals.
This whole SECURE Act, while mostly welcomed, is but a small part of your financial equation. For instance, take the new Beneficiary IRA rules. A spouse can get out of the 10-Year Rule by rolling over their deceased partner’s IRA into their own. But should they? It depends.
Of if you are not a spouse and inherit an IRA and are subject to the 10-Year Rule, it seems obvious that you should probably spread the distributions over the 10 years. But what seems obvious may not be true. An analysis of your anticipated tax situation across each of those 10 years will give you the answer.
Being able to contribute to your Traditional IRA past age 70-1/2 is a nice addition, especially with folks working longer. Still, if you qualify, should you? Maybe the Roth IRA makes more sense. It depends.
Some of these rule changes might even make you want to rethink how you structure your future plans. For instance, you might have your children as beneficiaries on your IRA. But looking at their tax situation you realize that while you are in the 12% tax bracket, they are in the 24%, and with the 10-Year Rule the IRA they will inherit likely will push them up even higher than that.
Perhaps you start taking increased distributions now under your tax bracket and give them some of the inheritance now. Or, if your financial situation shows you might need the money for yourself, you could effectively do the same thing through converting some of your Traditional IRA each year to your Roth IRA. When the kids inherit the Roth, while the 10-Year Rule applies, the distributions won’t be taxable to them.
So maybe the best thing this series has brought you is a renewed impetus to plan your financial future. That’s always a good start.
Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing