The SECURE Act: What It Is and How It Will Impact Retirement

Vertex Planning Partners / Planning, Resources, Retirement, Tax Changes / January 14, 2020

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in December 2019, includes many bi-partisan reforms that increase access to workplace plans and expand retirement savings. The retirement legislation includes policy changes that will impact defined contribution (DC) plans, defined benefit (DB) plans, individual retirement accounts (IRAs) and 529 plans. Below are two major changes to Required Minimum Distributions (RMDs) that could impact your retirement, tax and estate plan.

So What’s Changing with RMDs?

Congress pushed back when RMDs are required to begin. Under previous law, RMDs were set to begin once you reach age 70 ½. Under the SECURE Act, the new law states RMDs must begin at age 72. This gives owners of IRAs and 401(k)s a little more time to figure out what to do and allows these accounts to grow tax deferred for a few more years. It also makes sense these changes were made since people are working and living longer than any other time in history. But, pushing out the age in which RMDs are set to begin without changing the life expectancy tables will cause retirees to have higher RMDs, which in turn could increase taxes and Medicare premiums for some.

The second, and most impactful change, is the elimination of the so-called “Stretch IRA.” In the “stretch” strategy, beneficiaries of inherited IRAs, 401(k)s, and other tax-advantaged retirement accounts could stretch the required minimum distributions out over their own life expectancies. This would help preserve the tax-deferred nature of the account for many years. Under the SECURE Act, beneficiaries of these inherited IRAs and 401(k)s must distribute the full value of the account over a maximum of 10 years after the account owner dies. This change will most likely increase tax liability for many beneficiaries of an inherited IRA while complicating the original account holder’s legacy plan.

Estate and retirement income planning is complex and only getting more and more complicated. Now is a great time to evaluate your financial plan, from beneficiary designations to estate planning, and retirement income strategies. In light of the new rules, these changes will have an impact to your estate, legacy, tax retirement or general financial planning. Make sure you stay on the right track to secure the future you want for your loved ones. If you’re interested in learning more about the SECURE Act changes and how they may impact your retirement, please contact us at


* The information provided here is for general information only and should not be considered an individualized recommendation or personalized investment advice. This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.