If the Setting Every Community Up For Retirement Enhancement Act does get passed the Senate next session, it could mean changes to your clients’ financial plan.
Retirement Expert Jamie Hopkins shares four things that can help advisors and clients make SECURE changes without hurting their best-laid plans.
Advisors might need to revisit these items with clients:
- RMD beneficiary planning – “Do you have the right people listed as the beneficiary?” Hopkins asks. With any changes, performing a traditional beneficiary review could be warranted.
- Identifying places where trusts may have been used – Specifically in instances of conduit trust planning for children, the changes made in the SECURE Act could render those trusts useless because of the elimination of stretch IRA provisions. “We might not be getting the intended outcome there,” Hopkins said. “Is it time to go back and look at that and switch that over to an accumulation trust?”
- RMD age – Clients turning 70 ½ this year would be grandfathered in and would still need to take their RMDs this year. If SECURE is passed later this year, the age would change to 72 under the current version of the bill. This group would be immediately impacted as would their planning.
- Tax planning – “That’s probably going to be the more complex area, but really the area where we can add more value,” Hopkins said. With clients in mid-retirement this conversation could be asking questions like, what’s the impact on this account? Are Roth conversions necessary to reduce the tax impact? And how can we minimize the tax impact on life insurance and annuity policies and still pass on the legacy you want to your children or charity?
Frequently Asked Questions
Of course, changes such as legislation aren’t always so black and white. Hopkins addresses a few questions that he’s been asked about implementing the SECURE Act.
Q: When do the RMD changes take effect?
A: “There’s going to be a lot of confusion about that,” said Hopkins. Advisors should understand that this is only going to start Jan. 1, 2020, if the bill gets passed in a timely manner. These dates may change depending on how long it takes to get the bill through the Senate.
Q: Where do trusts fit in with RMD planning?
A: “I’m not really sure that people have studied it enough that there’s a ‘best answer’ yet,” said Hopkins. “It’s going to be a lot of individual, case-by-case review.”
Q: What will the tax impact on inherited account look like?
A: The Carson Group has developed a calculator it will debut once the SECURE Act passes, showing the differences in taxes on RMDs under a 10-year SECURE IRA vs. stretch IRAs. “It will highlight the need to do planning,” Hopkins said. “Advisors can say, hey, this change – can we do planning now to get you back in a better situation.’”
AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@Adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.