Most Americans have an ongoing fear of living beyond the money they’ve saved for their retirement years. And it’s not an irrational fear. There is, in fact, an actual lack of retirement preparedness among Americans, and it’s drawn the attention of Washington policymakers in recent years. According to the World Economic Forum: by 2050, the U.S. will face a $137 trillion retirement income gap (the difference between what savers need to have and what they’ve actually saved). If these projections are correct, retirees will outlive their savings by an average of eight to 20 years.1

The original Secure Act in 2019, altered the rules around saving and withdrawing money from your retirement accounts. The new 2.0 Act addresses additional issues related to retirement savings, creating new flexibility and accessibility to help individuals plan for a more secure future. New provisions are geared toward:

  1. Increasing participation in retirement plans through required auto-enrollment in new plans beginning 2025 and enhanced tax credits for start-up retirement plans starting 2023.
  2. Increased retirement savings with increased catch-up contributions.
  3. Preserving retirement savings by increasing the age of required minimum distributions (RMDs) and eliminating RMDs for designated ROTH accounts.
  4. Expanding use of ROTH accounts
  5. Easing access to Retirement Savings
  6. Other key provisions such as enhancements to Qualified Charitable Contributions and Roth IRA rollover options for unused 529 funds.

This informative flyer from Putnam includes a helpful summary of all the new provisions and how they might impact you.


The Secure Act 2.0 has ramifications for retirement, estate planning and for the assets you plan to leave your family

The changes to how Inherited IRAs are handled has turned estate planning on its end and can have big tax consequences.

The big change is the elimination of the Stretch IRA.  When we pass down IRA money to our children, we used to be able to stretch distributions over their lifetime.  The Stretch IRA was eliminated by the Secure Act.  For example, if I inherited IRA money from my mother, I would be able to “stretch” the distributions over my lifetime, creating a tax advantage for me through increased tax deferral and lower required minimum distributions.

Now that the stretch is eliminated, I only have 10 years to withdraw the money once my mother passes.  This often leads to higher tax consequences.  This becomes incredibly important when parents are planning for their estate and working to minimize tax consequences.  The parent may be at a lower tax bracket then their heir which could make withdrawing IRA funds or converting funds more attractive.  Additionally, not all assets are considered equal especially when leaving assets to a disabled child through a special needs trust.  Here, if a properly worded special needs trust is established, the stretch would still apply.

In the case of where a parent leaves IRA money to a Special Needs Trust, the required minimum distributions can still be stretched over the course of the disabled individual’s life.  This has huge impacts on the taxability of money.  For example, the Required Minimum distribution to the trust is 20,000.  And the trust distributes 15,000 of this money out to the disabled individual, only $5,000 is now taxed.  This could be in great contrast to leaving the same money to another child who is forced to take a now much larger distribution at potentially a much higher tax bracket.

If you have questions concerning the provisions discussed above or the linked attachment, please reach out to us. As always, we are here to help.

1. “Solving the global pension problem,” World Economic Forum

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