New Law Could Impact Your Best Laid Retirement Plans

By: Andrew T. Gardener, CFP®


Congress passed and President Trump signed the SECURE Act at the end of December. Here are some of the highlights of the Act that may be of interest to family stewards and private business owners.

Individual tax implications


Age Limit Eliminated for Traditional IRA Contributions 

The 70 ½ age limit for traditional IRA contributions is eliminated. Anyone working and earning income may continue to contribute to traditional IRAs. This provision was not extended to Roth IRAs, but “back-door Roth” opportunities may still exist, even beyond 70 ½.

RMD Age Raised to 72

The beginning required minimum distribution (RMD) age for all retirement accounts is now 72, pushing the RMD out 1-2 years, depending on the account holder’s birthday.

Stretch IRA Permanently Eliminated for most, but not all Traditional IRA Beneficiaries

This is the most controversial provision in the new law. Most beneficiaries of IRAs owned by someone who passed away on or after January 1, 2020, will no longer be able to “stretch” out the distributions, and therefore delay taxes, for life.

The new law requires most IRAs to be fully distributed and taxed by the end of the 10th year after the death of the original account holder. There are 5 beneficiary exceptions who may continue to “stretch” distributions and are exempt from the 10- year distribution cliff: Surviving Spouses, minor children, disabled beneficiaries, chronically ill beneficiaries and those not more than ten years younger than the original IRA owner.

This provision may make Roth IRAs more attractive than Traditional IRAs. Please read the Forbes article provided for more context. This provision may also cause unintended tax consequences for any retirement account with a trust named as a designated beneficiary. Careful review with financial, legal and tax advisors is recommended.

Qualified Charitable Distributions unchanged

The Qualified Charitable Distribution (QCD) age is not changing, so QCDs may still be made at age 70 ½ even though RMDs will not be required until age 72. This differential is likely to cause confusion.

New Exceptions to Early (pre-59 ½) Withdrawal Penalty

The 10% penalty for early (pre-59 ½) withdrawals from an IRA is now waived for paying expenses related to birth or legal adoption. The distribution is still subject to ordinary income tax and may be repaid (re-contributed) into the retirement account in the future.

IRA Contributions for Fellowship and Stipend Payments

Taxable non-tuition fellowships and stipends will now be treated as compensation to qualify for an IRA (or Roth IRA) contribution

Small Business Tax Implications

  • Businesses may now have a “safe-harbor” for offering IRAs through annuity providers.
  • Tax credits are now expanded for small businesses that establish new retirement plans for employees and for small businesses that adopt “auto-enrollment” for retirement plans
  • Employers may now be required to make more part-time employees eligible for 401k participation.
  • Small business owners may now be eligible to participate in Multiple Employer Retirement Plans
  • Certain employer-funded plans that previously had to be established by December 31 may now be adopted as late as the tax due-date of the employer’s tax return.

Each situation will be different, and you may consider reaching out to one of the Tanglewood Legacy Advisor’s Certified Financial Planners™, or your tax advisor, to learn exactly how the SECURE Act could impact your family or your business.


Written by: Andrew T. Gardener, CFP®