The SECURE Act of 2019 passed without too much fanfare at the end of 2019 because the beginning of 2020 introduced the COVID-19 pandemic and the airwaves were consumed with that news. However, this key piece of legislation has significant implications for retirees, especially those who have done a good job of saving and have accumulated most of their wealth in tax-deferred vehicles. The law had a few good changes in it, such as moving RMD age out to 72 and removing age limits on the ability to contribute to an IRA. However, the major update affecting retirement accounts has to do with the way these accounts will be inherited by your children. In the past, IRAs could have distributions stretched out over the course of your children’s lifetimes. This is where the term “Stretch IRA” came from. This was favorable to children inheriting money because they were able to see less of a tax impact on smaller distributions over the course of many years. With the passage of the SECURE Act, the Stretch IRA can no longer be utilized. The new law mandates that distributions from inherited retirement accounts MUST be taken out within 10 years of inheritance! Why is this significant? The average age of inheritance in this country is 51 (https://blog.massmutual.com/post/why-millennials-should-not-rely-on-an-inheritance), the peak earning years of your heirs’ careers. With distributions from an IRA condensed in to this short period of time, not only are your heirs getting taxed at higher brackets from the money you pass on, but they are also getting bumped in to higher brackets on their earned income!

If you are a family steward, like many of our select families, this probably doesn’t sit right with you and it didn’t sit right with us either! That is why we developed our signature strategies called The Ultimate Conversion and the SECURE Act Buster at Raleigh Wealth Solutions. Ever since this law was passed, we have been showing our families how to convert significant IRA assets for 20 cents or less on the dollar! We know that the main hurdle for many people who want to convert is that they will push their own tax bracket up to inefficient levels. That is why we couple conversions with unique tax strategies that are available for high income earners, but not everyone knows about.