(Marketwatch) Financial advisors, get ready for the first major piece of retirement legislation in a decade. Congress is likely to pass the Setting Every Community Up for Retirement Enhancement, or Secure Act, this week, as Reshma Kapadia of Barron's writes.
The legislation has been around for years but had gotten stalled. Now lawmakers have tacked it on to a must-pass spending bill required to keep the government open, all but guaranteeing passage before the holidays.
Here are some of the Secure Act’s key changes advisors should note:
- Individual investors will be able to continue to contribute to traditional IRAs after age 70 ½.
- Retirees won’t have to take required minimum distributions until age 72. The current threshold is 70 ½.
- The stretch IRA is going away. Beneficiaries of an IRA will have to draw down the account– and pay taxes on their withdrawals–over 10 years instead of over their lifetimes.
- Provisions could encourage employers to include annuities in their retirement plans.
The demise of the stretch IRA is likely to be unwelcome among financial advisors, who have counseled clients to use them as a way of passing down wealth while minimizing the tax hit. An heir could slowly draw down an inherited account over many decades. But the new 10-year deadline would make the IRA a “lousy estate planning vehicle,” retirement expert Ed Slott tells Kapadia.
Meanwhile, some advisors are expressing concern about the potential for annuities in workplace retirement plans, InvestmentNews reports.
“Annuities are complicated, and there are a lot of hidden fees,” Jennifer Weber, vice president of financial planning at Weber Asset Management, tells the publication. “I’m worried that sales people would sell you a product that’s not best for your investment needs.”
