Are Concerns About The SECURE Act Warranted, And What Does It Mean For IRAs?

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In May, the US House of Representatives passed the Setting Every Community Up for Retirement Enhancement Act (also referred to as the SECURE Act) with a vote of 417 to 3. Now, it is expected to unanimously be passed in the Senate as well.

Some of the main provisions of the bill include pushing the required minimum distributions (RMDs) to 72 from 70.5 years of age, enabling more small businesses to offer 401Ks with incentives, and permitting penalty-free withdrawals from 529 education-savings plans, amongst other things. Yet, as of late there has been increasing debate about whether the bill will actually make American families secure. In addition, there have been concerns about what the SECURE Act means for IRAs. In this article, three experts weigh in on whether concerns about the SECURE Act are warranted, and what the bill means for IRAs.

It Is A Dangerous Piece Of Legislation

“The SECURE Act is an effort by Washington to expand political control over private saving and investment. It is a dangerous piece of legislation that will not make families more secure. The SECURE Act will penalize long term withdrawals of money from savings accounts by changing provisions in the tax code that shield personal savings from income taxation. The Secure Act reneges on promises that were made to Americans that had relied on various savings vehicles to shield savings from taxation.

The SECURE Act will obliterate any remaining trust that Americans may still have that Washington is sincerely looking out for their best interest. Rather, the SECURE Act is a mechanism to extract more wealth from middle-class America and the American people should be outraged by the effects of this legislation.”

David Reischer, Estate Attorney & CEO of 

Concerns About The SECURE Act Are Overblown

“Concerns about the SECURE Act are overblown. Over 20 years, the number of clients I've worked with who have used a stretch IRA vs those clients that were 70 1/2 and wanted to delay their RMD – it's not even a blip on the radar.

If the legislation passes, before it goes into effect, clients will want to review their options with a tax planner or CFP to ensure their beneficiary elections are up to date and still the best option. Sure, that small group of wealthy will have to find another tax-efficient way to pass an estate to their heirs, but multiple planning opportunities will still exist.”

Tony Matheson, CFP, Founder and Wealth Advisor, Matheson Financial Partners LLC

The Current Version Of The Bill May Create A Need To Rethink Generational Transfer Planning With IRAs

“Probably the biggest concern regarding IRAs that comes from the SECURE Act is the elimination of the stretch IRA. Essentially, young IRA beneficiaries won’t have the ability to withdraw the IRA over their own lifetimes under the current version of the bill. This may create a need to rethink generational transfer planning with IRAs. However, the impact of this provision on the retiree that the IRA is intended for is minimal.

In fact, several provisions of the bill represent significant improvements for the retirees. Two key items of improvement are the removal of age restrictions on the front end and the back end. The SECURE Act would allow for contributions after 70 & ½ while also eliminating the need to take RMDs at that age. You may need to take distributions at that point anyway, but you would have greater flexibility with timing and amounts.”

Brandon Renfro, Professor, Financial Planner

Initially, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was drafted to confront the issue many Americans have apropos of actually saving for retirement. Based upon a troubling 2018 study by Northwestern Mutual, 1 in 3 Americans have less than $5000 in retirement savings, and a shocking 21% of those surveyed indicated they had no retirement savings at all. Moreover, 46% stated that they had taken no measures in the likelihood that they would outlive the savings they had accumulated for retirement.

As the SECURE Act enters the Senate, many believe the biggest obstacle will be the aforementioned provision involving 529 plans, which would repeal the new 2019 tax rules pertaining to children falling under the trust tax rates and brackets.

Given the resounding bipartisan support of the SECURE Act in Congress, despite the concerns, it would seem that the legislation will become law in 2019.

Sarah Bauder
Sarah Bauder

Sarah Bauder has a decade of experience at numerous publications, writing about finance, politics, economy and more.

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