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Featured on Forbes: The Death Of The Stretch IRA: Financial Strategies To Protect Your Legacy Post-SECURE Act
In December, Congress passed the SECURE Act, and the president signed it into law. The SECURE Act, which took effect Jan. 1, changes many of the rules surrounding individual retirement accounts and other retirement accounts.
There are a few important provisions you should know. First, the SECURE Act pushes back the required minimum distribution age from 70 1/2 to 72. This means that whether you like it or not, you will have to take a percentage of your pretax dollars out of your IRA at 72 instead of 70 1/2. Second, you can now make contributions to your IRA after 70 1/2 if you have earned income. Third, and most importantly, the SECURE Act has dealt a death blow to “Stretch IRAs.” This means that any non-spouse who inherits an IRA must pay all of the account’s required tax within 10 years of death versus being able to stretch the required minimum distributions over their lifetime.
The end of the “Stretch IRA” can have a dramatic effect on tax planning, estate planning and legacy planning. Estate plans, financial plans and tax strategies should be reviewed in this new post-SECURE Act world to ensure your family and loved ones don’t have a huge tax bill. Chances are that is not the legacy you want to leave.