The SECURE Act: What It Means for Your Retirement and Estate Planning
In late 2019, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act as part of a bipartisan federal spending bill. Signed into law on December 20, 2019, the Act took effect January 1, 2020, marking the most significant overhaul of retirement legislation since the Pension Protection Act of 2006.
The SECURE Act brings sweeping changes to retirement planning, taxation, and estate strategies. For many retirees, near-retirees, and their beneficiaries, these updates can create both opportunities and serious tax consequences. It is essential to review your retirement, estate, and trust plans to ensure they align with the new rules and protect your long-term financial goals.
Key Change: The End of the “Stretch IRA”
One of the most impactful provisions of the SECURE Act is the elimination of the “stretch IRA” for most non-spouse beneficiaries.
Before the Act, heirs could “stretch” required minimum distributions (RMDs) over their lifetime—allowing inherited IRA assets to grow tax-deferred for decades. Under the SECURE Act, non-spouse beneficiaries must withdraw the entire inherited IRA within ten years of the original account holder’s death.
This change effectively increases tax revenues for the government—and potential tax burdens for your heirs. It also poses particular challenges for trusts, especially older “see-through” trusts that were drafted before 2020. Without updated language, these trusts could restrict heirs from accessing funds properly or trigger unexpected tax liabilities.
If your estate plan includes a trust funded by retirement assets, it’s critical to review and update those documents immediately to ensure compliance with the SECURE Act.
Changes to Annuities and 401(k) Plans
The SECURE Act also makes it easier for employers to include annuities in workplace retirement plans like 401(k)s. While this could help some retirees secure guaranteed lifetime income, it also reduces fiduciary oversight—meaning employers may not be required to fully vet the insurance companies or products offered.
With looser standards and fewer safeguards, some employees may be exposed to poorly designed annuity products or financial risk if an insurance provider fails. As with any investment decision, it’s important to consult a trusted financial advisor before committing to an annuity within your retirement plan.
Other Major Provisions of the SECURE Act
According to Forbes, the SECURE Act includes several additional updates that could impact your retirement planning:
- Raises the required minimum distribution (RMD) age from 70½ to 72.
- Removes the age cap on traditional IRA contributions—allowing you to continue contributing while working.
- Expands small-business access to group retirement plans and offers tax credits for automatic enrollment.
- Allows penalty-free withdrawals (up to $5,000) from retirement accounts for birth or adoption expenses.
- Requires lifetime income disclosures in defined-contribution plans to help employees understand how their savings translate to monthly income.
- Eliminates the “stretch IRA” for most non-spouse beneficiaries, requiring distributions within ten years.
How to Respond to the SECURE Act
Financial experts, including those at Kiplinger, recommend several immediate steps to adapt to the SECURE Act’s changes:
- Reassess your IRA withdrawal strategy – If possible, delay distributions or diversify your savings vehicles.
- Consider paying taxes now – Roth conversions or pre-tax payments can reduce your heirs’ future tax burden.
- Review your estate documents – Update trusts and beneficiary designations to reflect the new 10-year rule.
- Coordinate with your advisors – Work closely with your financial planner, CPA, and estate planning attorneyto ensure consistency across all your plans.
The Bottom Line
The SECURE Act fundamentally changes how retirement assets are taxed, distributed, and inherited. Ignoring these updates could create unnecessary tax burdens or limit access to your beneficiaries’ inheritance.
At Aging in Maine / Kevin W. Weatherbee Law Offices, PLLC, we can help ensure your retirement and estate plansremain compliant and optimized under the SECURE Act.
Contact us today to schedule a review and protect your legacy for future generations (207)849-5600.
