The SECURE Act Is A Financial Planning “Game Changer”.

And, there are implications many have missed.

Jim Lorenzen, CFP®, AIF®

Why did congress pass The SECURE Act?

Simple.  This major change will bring in $15.7 billion in tax revenue by 2029, according to the joint committee on taxation in their report on the bill, H.R. 1994.   And, guess whose money they want?   Yes, yours.

The administration, of course, is looking for ways to address the debt by raising revenue without actually talking much about the debt.  They’re even kicking the can down the road on taxes, talking about making the current tax-cuts “permanent” – as if Washington had ever passed a permanent tax bill; it’s “Washington-speak”.  The current tax law is set to “sunset”, i.e., expire in 2026, taking us all back to the pre-2017 tax rates.   Permanency would be achieved by removing the sunset date.  So far, so good; but, if you’re one of those planning for the next two decades, you should be thinking about what the next ten congressional elections might bring. 

The Stretch IRA is all but eliminated.  Under the old law, an heir could inherit an IRA and stretch the RMDs over his/her life expectancy.   Okay, considering the inheritance will probably take place during their peak earning years.   So, a $17,000 RMD on a $500,000 IRA (purely hypothetical) won’t make much difference.   However, under The SECURE Act the inheritor must liquidate the IRA by the 10th year.   There’s NO RMD REQUIREMENT, so, the heir could let the IRA grow until the last year—but, then would be required to withdraw ALL funds in one year—talk about playing roulette with what the tax laws will be when the entire balance is added to that year’s income for calculating the tax bill.   Alternatively, the heir could take a 10% yearly distribution, for example.   But, in our example, that would add $50,000 each year to taxable income during what would likely be the heir’s peak earning years!

For the owner of a traditional IRA, remember that RMDs are considered in two other areas:  (1) how much of Social Security income will be subject to taxation, and (2) as income for determining your Medicare Part B premiums.  Oh, yes, high income in retirement means higher Part B premiums.

It’s a good time, especially for those with substantial incomes, to do some planning.



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Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.