The SECURE Act

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The Impact on Retirement Planning

Retirement savings adequacy is one of America’s foremost challenges. Helping clients understand and maximize the options available to them is integral to our role as a wealth management advisor. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which became effective January 1, 2020, will have wide ranging ramifications.  We see three provisions as particularly worthy of emphasis:

  • The start date for Required Minimum Distributions (RMDs) from retirement accounts was extended to age 72 for individuals not reaching age 70 1/2 prior to December 31, 2019;
  • Repeal of the age limitation on traditional IRAs, which now matches 401(k) and Roth IRA rules, enables continued contributions after age 70 1/2 for those with earned income;
  • With limited exceptions, the popular “Stretch IRA” has been eliminated by requiring assets of inherited retirement plans to be distributed within 10 years for newly inherited accounts in 2020 and beyond.

Moving back the start date for RMDs and allowing for continued IRA contributions for those working beyond age 70 1/2 are positive developments.  However, elimination of the Stretch IRA for retirement plan beneficiaries (with limited exceptions), is a retirement savings setback.

Other Notable Changes
  • Increased access to retirement plans for small employers and their employees;
  • $500 tax credit to encourage smaller employers to auto enroll employees in their company plans;
  • Allowing long-term part-time employees to participate in company 401(k) plans (employees with at least 500 hours worked for three consecutive years);
  • Mandated disclosures for Defined Contribution plans indicating how much income a lump sum balance could generate;
  • Greater flexibility to offer annuities in company retirement plans;
  • Allowing up to $10,000 of 529 Plan funds to be used to pay off student loan debt;
  • A new 10% penalty exception for Birth or Adoption up to $5,000.
Our Recommendations

Tax law and retirement savings regulation can be complicated and difficult to follow for the average employee and/or small business owner.  Individual circumstances differ and we strongly recommend periodically reviewing your personal situation.  Our portfolio managers can help identify opportunities to maximize the avenues open to you, particularly given The SECURE Act’s focus on broadening and expanding access to retirement savings.

 

How can we help you?  Please contact:
Jim O’Neil, Managing Director, 617-338-0700 x775
privateclient@appletonpartners.com
www.appletonpartners.com

 

This commentary reflects the opinions of Appleton Partners based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor. While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.  Specific securities identified and described may or may not be held in portfolios managed by the Adviser and do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed are, were or will be profitable. Any securities identified were selected for illustrative purposes only, as a vehicle for demonstrating investment analysis and decision making. Investment process, strategies, philosophies, allocations, performance composition, target characteristics and other parameters are current as of the date indicated and are subject to change without prior notice. Registration with the SEC should not be construed as an endorsement or an indicator of investment skill acumen or experience. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.

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