A Proposed Tax Bill Could Change Retirement Planning

September 5, 2019  |  

A Proposed Tax Bill Could Change Retirement Planning

Back in May, the U.S. House of Representatives overwhelmingly passed a landmark retirement reform bill called Setting Every Community Up for Retirement Enhancement” (SECURE).

The bill, which is awaiting passage in the Senate, makes significant changes that will impact most Americans who are preparing for retirement – or who are already retired. There are three important changes that will impact most of us in one way or another. Some of the more critical proposed changes are:

  1. Required Minimum Distributions start at age 72.
  2. Stretch IRAs will be shortened.
  3. You don’t have to stop saving for retirement at age 70½.

So, what does the SECURE ACT really mean for you and your family? Will it make you feel more (or less) secure?

Unless the income from your IRA is an integral part of your retirement income, most IRA holders want to postpone taking income until the last minute. This will get much easier to do under the SECURE bill. Instead of beginning your Required Minimum Distribution (RMD) at age 70-½, IRA holders will be able to delay their start date until to age 72. Even better, they will be able to make tax deductible contributions until 72 as well. This allows more time to build capital for retirement as compounding is your friend.

Sounds great on the surface, but let’s take a closer look. What happens after a person passes away? For starters, the bill will no longer allow IRA holders to pass their IRAs to heirs over the heirs‘ lifetime – often referred to as the Stretch IRA. Spouses and minor children are excluded. Additionally, the bill stipulates that upon death, the IRA must be liquidated within ten years. This change is expected to raise $16 billion dollars over the next decade, according to the Joint Committee on Taxation. The bill also gives the IRS the ability to take up to one third of your IRA and retirement plans which is a concern for some people.


Taxpayers who want to pass assets to heirs will now need to look at alternative tax strategies.  An approach that will likely become even more popular are strategic Roth IRA conversions.  A Roth conversion is the process of moving money from a pre-tax IRA to a Roth IRA with the goal of paying tax at potentially more favorable rates.  The Roth IRA can then be a tax-free asset used to manage your tax position in retirement or be passed to heirs as a tax-free asset.  Even if your heirs are required to withdraw the assets within 10 years, the Roth withdrawals will be tax-free to them.

For those who are charitably inclined, existing strategies such as donating your IRA to charity, implementing a Charitable Remainder Trust, or donating your RMD through a Qualified Charitable Distribution will likely become even more attractive.  We will be discussing these strategies with you, as well as your estate and tax advisors, as circumstances dictate.


As you read this, the Senate is expected to take up this Bill for discussion. Assuming they pass a comparable bill, it will have to go through a reconciliation committee and then will be sent to the President for signature. At this point, most people believe the Senate and President support these changes which means the bill will most likely pass. Unless we see any major changes in the Senate.

Please feel free to contact us at any time if you have concerns about your retirement plan under the new SECURE landscape. I’m happy to help.

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About Patrick Runyen

As a Wealth Manager at Independence Advisors, Patrick Runyen, CPA/PFS, CFP® works closely with clients to implement wealth management solutions. He leverages his technical financial planning and consulting experience to assist clients with investment counseling, retirement planning, estate planning, wealth enhancement, asset protection, tax planning, and other personally significant financial decisions. CLICK HERE TO ASK PAT.
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