Retirement Legislation Passes House

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In a 417 to 3 vote, the “Setting Every Community Up for Retirement Enhancement” or SECURE Act has passed the House, and is heading to the Senate for vote.  Here is a brief rundown of the bill’s major provisions along with some thoughts.

  • Required Minimum Distributions will be pushed out from age 70.5 to 72.
    • I would have preferred they pushed this out further, or just eliminated it all together.
  • Non-spouse individuals who inherit Retirement Accounts will be required to distribute them over a 10 year period.  Currently, a beneficiary can stretch the payments out over their lifetime.
    • The most disappointing part of the entire legislation, eliminating the ability for parents to pass their retirement savings along to their children in a tax efficient manner.  There is some hope the Senate can tweak this provision.
  • Allow parents to withdraw as much as $10,000 from 529 education plans towards paying some student loans.
    • What would make more sense is to simply allow 529 plans to pay any and all student loans.  Shouldn’t the reduction of student loan debt be more encouraged?
  • Provide protections and incentives to companies that add annuities to their 401(k) plan.
    • Setting every community up for retirement enhancement by introducing more high fee insurance products into the 401k marketplace?

In summary, this legislation really just provides insurance companies better access to the $5 trillion dollar 401k market, at the expense of the Inherited IRA.

If this legislation passes, here are a couple of items for consideration:

If you are currently saving in a retirement plan and do not need the tax breaks of Pre-tax contributions, Roth contributions going forward could make sense.  I would also review the fees inside of your 401k if your company moves to an annuity platform.

If you are retired, I would discuss Roth conversions with your accountant to see if it makes sense to gradually move money from Pre-tax to Roth over the course of several years.

Permanent life insurance to cover future tax liabilities will once again be a planning item.  This type of life insurance was minimalized when the estate tax cap was increased to over $11M.  Now it will come back into play, except this time for middle class America.

I hope this is helpful, as always if you have any questions please don’t hesitate to contact me at the office.  Have a great holiday weekend!