Jim O’Rilley, CPA, MST – Shareholder

Q. What impact, if any, will the SECURE Act, have on my tax planning for retirement?

There are three main provisions of the SECURE Act that will most likely impact high-net-worth individuals:

  1. You will be able to contribute to your traditional Individual Retirement Accounts (IRAs) after age 70 ½.
  2. You have until the year you attain age 72 to begin taking required minimum distributions (RMDs) from traditional IRA’s and other qualified plans.
  3. If you are expected to inherit assets of a 401(k) or IRA plan (other than from your spouse), including Roth IRAs, you will be required to withdraw the entire balance of the account within 10 years after the owner’s death.

The third provision is the most significant of the three from a planning perspective for high-net-worth individuals and families.

Prior to 2020, an IRA that was inherited by a non-spouse could be paid out over the life expectancy of the beneficiaries. Since withdrawals from most retirement accounts are taxed as income at the recipient’s highest rate, taking smaller withdrawals over more years provided a tax advantage. The SECURE Act has changed this and could result in a tax disadvantage without proper planning. If you are in your peak earning years and likely to inherit a sizable IRA or 401(k), you should be aware of what the withdrawals may look like so you can plan accordingly with your tax advisor.

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For more information relating to the SECURE Act, contact our tax advisors today.