The SECURE Act: How will this affect a retirement strategy?

Secure Act

As part of our SECURE Act series, we’re taking a look at how recent bill changes will impact individual investors and pre-retirees. Signed into law in December 2019, the SECURE Act has created a handful of new rules and regulations surrounding retirement accounts like IRAs, 401(k)s, and 529s. Individuals, as well as financial advisors, need to be in the know about these rule changes and how they pertain to long-term financial planning.

So, how will the SECURE Act actually impact a retirement strategy?

There are two “pockets” of clients that this will impact the most in the short-term:

  1. Those turning 70.5 in 2020
  2. Those with significant IRA assets

These individuals are the first wave, in a sense, of those who should be asking questions and talking to their advisor about projected retirement plans.

Primarily, the SECURE Act could change what these investor’s legacies look like. Regarding an IRA, for example, they’ll have to revisit how they might want to gift inheritance funds to future generations, and what the (new) tax implications could be. From the perspective of required minimum distributions (RMDs), the SECURE Act now dictates that the age at which RMDs must start is 72 (but those who turned 70.5, the original RMD “trigger age,” in 2019 are not delayed). With the new age timeline in place, it essentially adds two more years of potential growth to someone’s investment accounts. It could boost someone into a higher tax bracket, ultimately changing elements of their financial plan.

For younger clients, the SECURE Act is not necessarily anything to fret over. Since those individuals are still in the accumulation phase, these shorter-term changes will not influence the direction of their future financial plans.

While outlining significant rule changes, the SECURE Act is nothing individuals should be concerned about; rather, they should lean on their advisors who are working diligently to decipher and determine the changes at hand. Advisors will not be re-inventing the wheel when it comes to client plans, but it is important for clients and advisors to revisit plans and see how slight tweaks to retirement goals may roll out.

Check back to the blog soon, as we will continue coverage around the SECURE Act.

Nathan Boxx, Bradley Newman, Jason Seltzer

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