39.9 F
Delaware
Saturday, March 6, 2021

New Retirement Act Passes House; Presents Important Planning Opportunity and Choices

Must Read

State to ramp up vaccines for teachers, has given 253,535 doses of vaccine

253,535 doses of the COVID-19 vaccine had been administered as of Friday, the state said.

Schools hope summer programs, support will avoid students being held back

  Droves of students will not be held back because of interruptions caused by the COVID-19 pandemic, Delaware educators say. Instead,...

Do More 24 shatters record in first three hours, ends with 5 times last year’s total

The grand total for the 2021 event will be announced Saturday by 8 p.m.
Murray Sawyer
Murray Sawyer
Murray Sawyer is Founder, President and Chief Executive Officer of Westover Capital Advisors, LLC, an independent, privately-owned investment advisory firm exclusively focused on investment and wealth management. To learn more, please visit westovercapital.com.

Who says cats and mice can’t play nicely together?

The US House of Representatives by rare, near unanimity, recently passed a significant retirement bill. The vote was 417 to 3. Its acronym is SECURE, which is short for Setting Every Community Up for Retirement Enhancement. It’s a Big Deal and augurs the biggest changes to retirement plans in 20 years.

Senate Finance Committee Chairman Charles Grassley said just this past week that advancing the bill through the Senate is a top priority.

I have no doubt the cats and mice in the Senate will play nice too. In fact, I’ll go so far as to predict that this legislation will be passed as fast as a Mercedes AMG S63 on the Bonneville Salt Flats. In this era of Pelosi/Schumer v. Trump, both houses are desperate to have some legislative success to point the voter to, don’t you think?

 

Key Components of the SECURE Act

There’s a whole bunch of fluff in the Act designed to help small business employees, home care workers, long-term part-time workers, and benefit annuity-issuing insurance companies which I’ll ignore, so let me cut to the chase. The three main takeaways are these:

  1. The SECURE Act eliminates the so-called “Stretch IRA.” Today, children and non-spousal beneficiaries can take their required withdrawals out over their lifetimes. With the passage of this legislation, if you are an adult child who inherits an IRA, you must withdrawal the entire account within ten years. (And as an incidental result, this is projected to generate $16 billion for the U.S. Treasury which it would not have otherwise enjoyed. Why am I not surprised?)
  2. You may make contributions to IRAs at any age, even after you turn 70.5. The point here is that you could continue to make contributions to IRAs for your entire lifetime.
  3. The Required Minimum Distribution clock, the mandatory time when you need to start taking withdrawals from traditional IRAs, is pushed back from 70.5 years of age to 72. I never knew what the magic of 70.5 was anyway, so this is good, so long as you can afford to wait.

 

How the Legislation Might Affect You

Should this legislation become law, the main planning point reinforces our general recommendation that clients strongly consider the possibility of using Roth conversions with respect to existing IRAs, or parts thereof.

Remember, the window for Roth conversions at a favorable tax rate is time-limited. Personal income tax rates will soon enough go back up come 2026, when the lower income tax rates and brackets of the 2017 Tax Act are scheduled to sunset. Today, a step-by-step, year-over-year conversion may make sense for you. 

Every individual’s circumstances are different, so this recommendation will not apply to all, but please reach out to us if you would like us to discuss your particular circumstances.

Sponsored content

- Thank you to our sponsor -
- Thank you to our sponsor -
- Thank you to our sponsor -

Latest News

State to ramp up vaccines for teachers, has given 253,535 doses of vaccine

253,535 doses of the COVID-19 vaccine had been administered as of Friday, the state said.

Schools hope summer programs, support will avoid students being held back

  Droves of students will not be held back because of interruptions caused by the COVID-19 pandemic, Delaware educators say. Instead, schools will bear down on...

Do More 24 shatters record in first three hours, ends with 5 times last year’s total

The grand total for the 2021 event will be announced Saturday by 8 p.m.
- Thank you to our sponsor -
- Thank you to our sponsor -

More Articles Like This

%d bloggers like this: