The most terrifying words in the English language are:”I’m from the government and I’m here to help.” Ronald Reagan Last week the U.S. House of Representatives passed the Secure Act. It’s stated goal was to make your retirement more secure. But what does it actually do?
- It mandates that your 401(k) provider put annuities into your retirement plan. The Insurance companies even had congress mandate in the bill that annuity advertising be included in your 401(k) information package. While we believe annuities have their place in retirement plans, who is going to make sure that these annuities are not filled with fees and unnecessary riders which will eat away at your savings.
- It will change the age for required minimum distributions from 70 ½ to 72. Moving from 70 ½ to 72 delays the inevitable. It may also result in larger required minimum distributions which could result in a bigger tax bite.
- Require that all inherited IRAs be fully distributed within 10 years of death. The current law allows your children or even grandchildren to stretch their IRA payments throughout their entire life. This is a significant tax benefit for them. Under this bill, the money will be forced to come out of your IRA within 10 years which will result in the government getting more of your IRA money through higher taxes.
What should we do right now? It seems like the Senate is going to slow this bill down a bit but I never bet against the insurance companies. Some form of this bill will ultimately pass but probably not for this year. For those of you who were thinking of delaying your required minimum distributions to see if the bill passes I would suggest you not wait too long. Even if it is signed into law this year, there will be a 12 to 24 month period before it will be implemented. We are closely monitoring the progress of this bill and will let you know when or if it becomes law. We are also working with legal and tax experts to determine how the different parts of the bill will impact your retirement plan. In my next blog, I will discuss the new Fiduciary Rule the SEC just created.
Have a great week,
My best, Mark