The SECURE Act and Your Retirement Account
Signed into law days before Christmas and going into effect as of January 1, 2020, the Setting Every Community Up for Retirement Enhancement Act of 2019—better known as the SECURE Act—includes provisions meant to increase access to tax-advantaged accounts and prevent people from outliving their assets in retirement. With that, though, comes a number of significant changes affecting a wide range of people.
As a growing number of Stonewall donors turn to retirement accounts to boost their philanthropy, one change, in particular, has caught our attention. Prior to the SECURE Act, income from retirement accounts passed to a non-spouse beneficiary (e.g., a child or other loved one) could be stretched; that is received incrementally over a number of years, or decades even, depending on the account size and the age and life expectancy of the beneficiary. New rules, however, accelerate distributions for many inheritors, requiring total depletion of an account within 10 years. Because such payments are taxed at a beneficiary’s income tax bracket, this can result in unforeseen or unplanned tax bracket jumps and greater taxes overall. To offset potential spikes in taxes, some people are considering increases to their charitable giving and thinking more carefully—and creatively—about the timing of their giving in the context of their broader financial plans.
Curious how the SECURE Act could affect you and your family? Here are a few readings we found helpful:
Specifics on how IRAs and 401(k)s are impacted, Washington Post
8 Moves to consider under the new Secure Act, NerdWallet
Where your financial planning is concerned, we encourage you to talk to a trusted, well-informed, and credentialed advisor. If you are interested in moving more money into the community or simply want expert advice in doing so, Stonewall is here to help. Just give us a call or email us to set up a meeting.