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Assessing How The SECURE Act May Impact Investing For Your Retirement

Jan. 07, 2020 8:30 AM ET69 Comments


  • The Setting Every Community Up for Retirement Enhancement (SECURE) Act.
  • Many of its provisions benefit everyday investors for retirement.
  • However, there are several disadvantages that will increase taxes for many.
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We have been following the SECURE Act for more than a year at Yield Hunting. Finally, we can report that on December 20th, President Trump signed the SECURE Act into law as part of the year end appropriations bill.

Most of these changes take place in 2020... so how will they affect you? And remember, several of them are not just for those at or near retirement. They can have a profound effect on the way we all save for retirement.

Here are the major takeaways:


Let's start with the bad news. The STRETCH IRA is dead, replaced with a 10-year rule. The STRETCH IRA allowed non-spousal IRA beneficiaries to "stretch" required minimum distributions (RMDs) from an inherited account over their own lifetime (which allowed the funds to potentially grow tax-free for decades).

The Ten Year Rule now means all inherited IRAs must be fully withdrawn by the 10th year following that inheritance. Within that 10-year period, there are no distribution requirements giving beneficiaries some flexibility. This could have been much worse as a 5-year rule was originally proposed.

Some beneficiaries are not subjected to the new rule, including:

  • Spouses
  • Disabled
  • Chronically ill
  • Individuals less than 10 years younger than the decedent
  • Certain minor children until they reach the age of majority, at which point the ten-year rule would commence

Required Minimum Distributions (RMDs) will go from age 70.5 to 72

The current RMD age is 70.5, and a lot of planning has been centered on that number. The new age at which point the government forces you to start taking distributions is 72. While the 1.5 years is not much, it does help many people who would have otherwise been forced to pay a lot of taxes. You actually do not have to take the first distribution until April 1 of

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This article was written by

Alpha Gen Capital profile picture

Alpha Gen Capital is a former financial advisor and his analysis is meant to provide a relatively safer income stream with CEFs and mutual funds. He has been writing about investing on Seeking Alpha for the past decade and he aims to help investors better understand how to properly construct a portfolio.

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Comments (69)

24 Jan. 2020
No.longer any age restrictions on further IRA contributions, you report, but are they still tax deductible and does this apply to SEP IRAs too? Thanks.
11 Jan. 2020
Does anyone know if the 403(b) Pre-1987 accumulation has the RMD at age 76.5 now instead of age 75 where it was?
Vexed profile picture
I am confused regarding the statement contained in the RMD section of the article: "You actually do not have to take the first distribution until April 1 of the following year after you turn 72 (favoring those born in the first half of the year)." Does that mean the retiree will be required to take two RMDs at age 73; one for the year the retiree turned 72 and then for the year the retiree turned 73?
Retired Investor profile picture
@Vexed Yes. If you decide to delay the first one, you need to take two the following year.
If RMD's don't start until the year after you turn 72 what is the factor used to compute that 1st year distribution? Is it the same factor that it used to be for 72? i.e. 25.6?
Vexed profile picture
gstucke: I found the answer to your question here: www.fool.com/...
Vexed: I quickly reviewed the "Fool" article and it doesn't seem that they mentioned the proposed new IRS tables under proposed regulations to be effective beginning in 2021. These new tables are unrelated to the SECURE Act since the tables are supposed to be updated every 10 years to reflect actuarial changes. I think public comments on the proposed reg are due in about a week and I doubt the new tables will be changed. They'll add about a year and a half to a 72 year old as I recall.
Phenom1 profile picture
Please All: Note that this new law is fattening the pigs for the slaughter. Unless the Trump tax cuts are made permanent (they sunset in 2025), the extra 1.5 years for compounding will mean little. If we revert to the old tax brackets without the personal exemption that was eliminated, we'll pay out much more in taxes under the old brackets than we will ever be able to save as a result of the extra compounding.

Pressure Congress to make the Trump tax cuts permanent.
One day the age could be changed to a younger one....The sooner RMDs are taken, the
govt will get money sooner...II'm sure they won't have a problem taking it.
The Aiki Trader profile picture
You know you can start taking withdraws at 59 1/2 without penalty from IRAs.
In your opinion, how has the new inherited IRA rule changed the way we think about distributions? Let’s assume an individual has a large IRA that will most likely be passed to the next generation. Better to start taking additional distributions now and pay the tax today, and then reinvest the proceeds in nonqual acct for legacy purposes? Or, possibly fund some sort of Life Insurance policy with additional proceeds? Roth IRA conversion? I’m trying to get my arms around how this new law may, or may not, change the way we look at IRA distributions and Legacy assets.... How do you quantify the effects of taxes? Really appreciate your perspective! Thanks!
The Aiki Trader profile picture
It means you should consider while you are working contributing to a Roth IRA so as not to put your heirs who are probably of working age and maybe even of prime working age into 32% or higher tax brackets.
sts66 profile picture
A life insurance policy isn't a bad idea - I'm pretty sure proceeds from that are non-taxable even if a non-spouse is the beneficiary.
Alpha Gen Capital profile picture
Death benefit is tax free. Cash value can be accessed (highly liquid) up to 90% of value.
paulalbert profile picture
The optionality of when to meet the 10 year payout requirement actually may create some interesting possibilities of what is optimum. Letting it compound for 10 years and then paying in a lump sum, may be a better net present value result even after paying an enormous tax payment. This is relevant for us since I am 77 and my wife is 79 and our son is 43. Assuming the normal expected course of events, I die first and my wife lives into her nineties ( family history suggests that is a good possibility ) our son is likely faced with this decision in his mid fifties. Because my wife is a couple years older, we will not benefit that much from the spousal stretch out even if i die first. Trying to model different scenarios is challenging , not only because we do not know when we are going to die or the order, but the inputs require investment return assumptions, and also for our son he needs to assume his marginal tax rate during the 10 year period, affected by his earned and investment income during the period as well as the vicissitudes of politicians.

In spite of our RMDs increasing each year, we have managed to keep the aggregate value of our IRA Rollover accounts going up, so as the RMD divisor goes down our RMD is larger and larger and keeps us in a high tax bracket. I guess many would rightfully say we have a good problem, but it illustrates something I have commented on in the past;, i.e., that for anyone who has prudently saved for retirement ( IRA, 401K, etc. ) assuming a lower tax bracket in retirement is not likely to be reality. Having 85% of gross ( no deduction for enormous Medicare premiums ) SocIal Security taxed at ordinary rates is particularly galling.
7865671 profile picture
"...we will not benefit that much from the spousal stretch out..."
As I understood the article, spouses are not required to deplete the inherited IRA within the 10 years. There are still RMD's, but the 10 year window does not apply. Maybe I've misunderstood???
Fantastic point!!! Everyone is chomping at the bit to help during the accumulation phase, but very few are skilled in helping with the distribution phase... I believe in the 3 bucket system: Liquidity, Lifetime, and Legacy... Uniquely, the legacy bucket has the most upside and tax advantages. Unfortunately I feel most advisors are so focused on capturing assets (meaning their all about the investments and not the over all plan) that they lack the skills to help with the distribution of the assets. Do you think I’m over thinking things?
rickevantodd profile picture
If you or your spouse do not need the other IRA upon death than maybe consider, based upon taxes etc, letting your son inherit as Each parent passes in lieu of waiting until both parents are gone.
Retired Investor profile picture
The stretch IRA died because the government needed to make up the taxes lost by delaying RMDs to 72. This won’t be the last change we see to generate more tax revenue considering the deficits the US has. I fully expect Roths to have RMDs down the road so the funds get moved to taxable investments.
Retired Investor: I expect much more change to Roths than merely requiring an RMD. If the Congress gets desperate enough, they will do whatever is necessary, including something like taxing all growth in a Roth beyond a given date (to grandfather in existing appreciation/growth, but tax all future income upon withdrawal). The Roth IRA, like the former stretch IRA provisions, is too good to be true.
IZZKUBE2.5 profile picture
@robertlgriffin ,

" including something like taxing all growth in a Roth beyond a given date (to grandfather in existing appreciation/growth, but tax all future income upon withdrawal):"

Yup, I agree with you, it's too good to be true even though one has already paid the tax upfront (after tax contributions), but they'll find a way to tax something and your idea...would be the easiest. Please don't offer any more idea(s) because they read it here.
Retired Investor profile picture
@IZZKUBE2.5 @robertlgriffin Should we ask SA to delete these comments so Congress doesn’t see them?
Is increased access to annuities really a good thing?
Alpha Gen Capital profile picture
I believe so. Most investors/retirees today have WAY too much risk exposure. Some know that. Most have no idea. They need a pension like income stream not correlated to the markets. Annuities are just private pensions.
sts66 profile picture
"They need a pension like income stream not correlated to the markets"

You mean something like a good solid CEF? (or many of them ;-) I dislike annuities in this low interest rate environment because you have to live so damn long just to get your own money back, let alone actually get paid more than you gave the insurance company, and it's even worse if they're inflation adjusted. Actually maybe the opposite - the purchasing power of a fixed monthly payment is going to shrink drastically over 20 yrs.
polecat profile picture
“I told my children long ago, “If your generation ever figures out what my generation has done to you, you would round up all the Boomers up and shoot us. Lucky for us, your generation has proven to be lazy and stupid “.
Now, plans like this will put the finishing touch’s on the Boomers screwing all of the following generations.”
I posted this several months ago, an once again Boomers are screwing those that come after.
Dennis O profile picture
@polecat It made me think. What you said may be correct because of our age group BUT the real screwing as you put it is really from only a few people . Those people would be our elected officials who caused the large deficits which I assume you are talking about. It's like a lot of things in life. Example- union leaders are corrupt but the members are everyday folks doing the best they can. Same could be said about FBI leadership were recently found corrupt but the FBI guy on the job is also doing his job. You get my point. The next generation may have a reason to feel wronged but by only a few who have the power to do so. Have a great day.
fhbecker profile picture

I think its the politicians and those that keep voting for the two big parties that are doing the "screwing." and not everyone born between 1946 and 1964.

Sadly, many of the boomers "children" appear to be looking toward a form of government that is not very "capitalist."
Seems current and former “capitalist” governments here have done a great job in burdening future generations with debt and unfunded deferred maintenance. Captalism per se is not the answer. Responsible planning with consideration of future consequences is. With this move maybe they’re adding insult to injury by saying we want some of that deferred tax back sooner. But does that really hurt future generations? They still have all the better savings opportunities included to provide for themselves - a main tenet of “capitalism” US style today.
Donggle profile picture
This will make one more secure? No WAY. Your still the working poor!
Phenom1 profile picture
Typical government wording...the opposite of what will happen. Remember the "affordable care act" was neither.
Thank you
amegalo profile picture
The new stretch IRA rule does not affect current stretch IRAs, only new ones correct?
amegalo: The new rules as to the 10 year NON-STRETCH apply to decedents dying after 12/31/2019, so there is a grandfather provision for current inherited IRAs.
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