The SECURE Act of 2019 represented the biggest update to retirement law in over a decade. Now, even as some of the tax ramifications of that bill are still being worked out, Congress is deliberating on what “SECURE 2.0” legislation might entail.
In March, the House passed the Securing a Strong Retirement Act with a bipartisan 414-5 vote. The Senate is still weighing numerous proposals for their version, the Rise & Shine Act.
Proposals under consideration include:
One of the main goals of having RMDs on Traditional IRA's, 401(k)'s, 403(b)'s, and other deferred compensation plans, is so the IRS can begin to receive tax money on accounts that are not being utilized. Raising the age to start the RMDs is said to be helpful because of increased longevity. However, with the new non-spousal Beneficiary RMD rules that came out in the SECURE Act of 2019, delaying withdrawals may not always be the best solution when it comes to legacy planning.
Most non-spousal beneficiaries tend to be children of the deceased account holder. They must take RMDs on the accounts no later than December 31st in the year following the death of the original account holder. ALL distributions from this account must be completed within 10 years! There is a good chance that those 10 years are also the beneficiary's "highest-earning" years in their own careers, thus creating a large tax bill. BENEFICIARY BEWARE!
Reconciling these bills will take time, but it’s clear that SECURE 2.0 could bring about another raft of significant changes for business owners and employees. If leaving IRA or 401(k) money to your children is one of your goals, it is important for you to visit with an advisor and understand the solutions that are out there.
SECURE 2.0 : Changing Retirement and the Beneficiary's Tax Bill
July 26, 2022