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The SECURE Act: Stretch IRAs Gone for Many

By Portage County Business Council

By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management AdvisorSM
Accredited Investment Fiduciary®

The Setting Every Community Up for Retirement Enhancement Act of 2019 was signed into law on 12/20/2019 and most rules took effect on 01/01/2020.  Many of the new provisions are retirement-saver friendly, but I was sad to see that the modifications to required minimum distribution (RMD) rules included the elimination of the “Stretch IRA” strategy for many non-spouse beneficiaries.

If the owner of an IRA or defined contribution plan passed away prior to the new decade (2020), a non-spouse beneficiary had the option of “stretching” the tax deferral over their lifetimes.  The non-spouse beneficiary is subject to RMD rules which are calculated by taking the balance of the account on December 31 of the previous year and using the IRS Uniform Lifetime table to calculate the annual RMD.  Since the RMD is based on life expectancy, the tax deferral could be “stretched” throughout the beneficiary’s lifetime.  This could be a powerful strategy for gaining traction on making a family financially stronger, since most non-spouse beneficiaries are the children of the account owner, and therefore a generation younger than the original owner (and subject to a lower RMD).

Now, with the new rules of the SECURE Act, most non-spouse beneficiaries’ inherited retirement accounts “are generally required to be distributed by the end of the tenth calendar year following the year of the employee or IRA owner’s death.”(1)  This essentially means that the balance of the IRA is to be withdrawn by the end of the 10th year and, if it is not in a ROTH account, will be added to the beneficiary’s taxable income.  Potentially the most impactful though, is losing the “stretch” over multiple generations.

There are a few exceptions to the new 10-year rule, including the “surviving spouse of the employee (or IRA owner), disabled or chronically ill individuals, individuals who are not more than 10 years younger than the employee (or IRA owner), or child of the employee (or IRA owner) who has not reached the age of majority”(1).

No doubt this new rule will cause many to reconsider their estate planning strategies and beneficiary designations across their various assets.  One thing for sure, new rules sure do keep us on our toes, so to speak, when considering how planning and important decisions affect individuals and families.

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.