There are significant changes surrounding retirement planning and IRA accounts. As of May of this year, the House passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act. With these changes, retirees and other groups of individuals, like part-time workers, may be affected. Although the SECURE Act has not gone through the Senate yet, there are a few different updates that those affected should pay close attention to. Here is what you should know:
Passing Assets to Beneficiaries
High-net-worth families are likely to be impacted by the SECURE Act. Often, IRA assets are passed down to the following generations. One of the updates that could affect these families is the time limit non-spouse beneficiaries have to collect distributions after they receive an inheritance. The limit would require recipients to obtain their distributions within ten years. As it currently stands, beneficiaries can collect inheritance distributions over their life-time; successfully being able to spread the funds over a more extended period of time and ease the tax impact. In some circumstances, beneficiaries can collect their funds after they retire when they can enter a lower tax bracket. If the SECURE Act passes through the Senate and distributions have to be collected within ten years, many individuals would face a higher tax rate, as they would have to collect larger fund amounts at a time.
Tax savings can also be a possibility with the new SECURE Act as well. Should the Senate pass the Act, it would change the age for beginning Required Minimum Distributions (RMDs) from 70 ½ to 72 years old. The benefit of this comes from creating an opportunity for individuals to re-work their tax planning strategies. Essentially, this update will give people an extra year and a half before they are required to start taking their taxable income.
Focusing on financial planning and retirement accounts are a great way to prepare yourself for any potential upcoming IRA changes and updates. Take the time to stay ahead of proposed acts like the SECURE Act to better prepare yourself down the road.
Christopher Jacob is a Registered Representative with Saxony Securities, Inc.. Securities offered through Saxony Securities Inc. (SSI). Member FINRA, SIPC. Non-security products and services or tax services are not offered through SSI. Cadeau is not affiliated with SSI.