9 Top Questions (and Answers) on the SECURE Act

Yes, the SECURE Act eliminates the stretch for both inherited Traditional IRAs and Roth IRAs.

No. If the IRA owner is already deceased and there is an existing inherited IRA, the SECURE Act will not eliminate the stretch. Existing inherited IRAs will be grandfathered.

Congress sees the elimination of the stretch IRA as a revenue raiser.  This could be one of the larger tax increases in a generation.  To lawmakers, passing this legislation creates long term tax revenue and offsets the costs of other provisions in the current budget deal (spending increases for the military and social programs).

The law will be effective for inherited IRAs when the IRA owner dies after December 31, 2019.  For anyone with a current stretchout, they will not be impacted.

Most non-spouse beneficiaries will be required to distribute the inherited IRA by the end of the tenth year following the year of death. This ten-year rule would work similarly to the way the current five-year rule works for annuities and 401k accounts. During the ten-year period there is flexibility. No yearly distributions are required but the account must be emptied by the end of the tenth year.

Yes. These will include...

• a surviving spouse;
• a minor child (see below);
• a disabled individual (see below); and
• an individual who is not more than 10 years younger than the deceased participant or IRA owner.

MINOR CHILD: The exception for a minor child would no longer apply once the child reaches the age of majority. Accordingly, the remainder of the distributions to that individual must be completed within 10 years after that date.

DISABLED INDIVIDUAL.  A disabled individual for purposes of the SECURE ACT includes  persons who are unable to engage in any substantial gainful activity due to a medically determinable physical or mental impairment. This will include chronically ill individuals whose period of inability to perform at least two activities of daily living, such as bathing, dressing, or toileting, has been certified as indefinite and is expected to be lengthy. The determination as to the existence of an eligible designated beneficiary will be made as of the death of the plan participant or IRA owner.

Yes. Spouse beneficiaries may still do a spousal rollover to an IRA in their own name.

Yes, thankfully there were some common-sense changes, too. The SECURE Act now allows those working past 70 1/2 to contribute to IRAs, which matches the rules for 401(k)s and Roth IRAs. This also opens the door for a lot of planning strategies like additional back-door Roth IRAs later in life.

Additionally, the SECURE Act pushed out the date to start RMDs till age 72, but this only applies to those who do not attain age 70 1/2 by the end of 2019. This, coupled with pending IRS rules around RMD factors, will reduce the amount of money retirees need to withdrawal each year in retirement.

This law has cleared the Congress, so it will likely become effective December 31, 2019 if signed by President Trump. The President has already confirmed he will do so.