The SECURE Act of 2019: Significant Changes That May Impact Your Retirement Planning

By on January 13, 2020

Happy New Year — and welcome to the new decade! We hope that you had a joyous holiday season surrounded by friends and family.

Stocks continued marching upward in the fourth quarter, capping off a stellar decade for equity investors. The S&P 500 Index of large U.S. stocks notched its second-best annual performance since 1997 with a 31.5% total return. Small U.S. stocks followed closely behind with the Russell 2000 Index up 25.5% for the year. Overall, the gains came without much volatility, even amidst ongoing global trade disputes and continued political uncertainty heading into the 2020 U.S. Presidential election.

Facilitated by the Federal Reserve lowering their key interest rate three times, fixed income markets also produced impressive returns in 2019. Intermediate-term bonds had their best year since 2007 with a total return of 6.8%. Over the course of the year, the yield on the benchmark 10-year U.S. Treasury Note dropped nearly 28% from 2.66% to 1.92%, keeping mortgage rates attractive for home buyers and overall debt financing costs low.

Asset class returns for the quarter and full year were as follows:



Asset Class


Quarter 2019

Full Year


Barclays U.S. Govt./Credit—Int. Fixed Income



S&P 500 Large U.S. Stocks



Russell 2000 Small U.S. Stocks



MSCI ACWI ex-USA Foreign Stocks



S&P Global REIT Real Estate Securities




As the year ended, new legislation related to retirement plans (which had been in the works for several years) made its way into the year-end spending bill that helped keep the government up and running. This new bill, called the SECURE Act of 2019, is now in effect and will bring significant changes to retirement plans and IRA accounts. Some of the most notable changes and their potential implications are highlighted in this letter.

  • The mandatory Required Minimum Distribution (RMD) age has increased for IRA owners to 72 for individuals who attain age 70½ after December 31, 2019. The mandatory RMD age is still 70½ for individuals who attained that age on or before December 31, 2019. The small increase in the RMD age may not seem meaningful at first glance, but it can certainly be impactful for those in relatively high-income tax brackets.
    • Planning Implications: The delayed mandatory RMD age allows more time to complete Roth IRA conversions in retirement years when tax liabilities are likely lower. Also, the same as the previous law, account owners who turn 72 years old will be able to delay their first RMD until April 1st of the following year, if they choose to do so, but a second RMD would also need to be taken that year, resulting in additional taxable income. For those who are charitably inclined, the delayed RMD age does not affect the age for making Qualified Charitable Distributions (QCDs) from IRA accounts. The qualifying age to make QCDs from traditional IRA accounts remains 70½ and a small window of time now exists where QCDs may be made (up to $100,000 per year) prior to the first RMD.
  • Individuals who inherit IRAs or retirement plan accounts are now subject to different distribution rules. The new provisions limit how non-spouse beneficiaries of an IRA or retirement plan account can take distributions after they inherit the account. Previously, non-spouse beneficiaries could stretch required minimum distributions over their lifetime and receive a longer period of tax deferred (or potentially tax-free for Roth accounts) compounded growth. Under the new provisions, a non-spouse beneficiary will have to withdraw the inherited assets by the end of the tenth year after the death of the original account holder.
    • Planning Implications: This rule takes effect for IRA and retirement plan account owners who pass away after December 31, 2019, and does not apply to spouses who inherit the account from their deceased spouse. There are also exceptions for beneficiaries who are chronically ill or disabled, beneficiaries who are less than ten years younger than the deceased account owner, and minor children (of the original account owner, only until they reach the age of majority). The change affects inherited Roth IRA accounts as well, greatly diminishing the long-term tax-free compounding potential, especially for younger heirs. However, the tax-free nature of Roth IRAs still makes Roth conversions beneficial for passing money tax efficiently to heirs in many cases. Notably, the new rules do not require annual withdrawals from an inherited IRA or retirement account, so a beneficiary could theoretically postpone the entire payout until the end of the 10-year period (although the tax ramifications should be examined as the entire value of the account would be taxed in a single tax year).
  • The age limit for contributing to a traditional IRA has been eliminated. Beginning in 2020, the SECURE Act removes the age cap for contributing to a traditional IRA. Individuals of any age will now be able to contribute to a traditional IRA, as long as they have sufficient earned income.
    • Planning Implications: The tax-deferred income and contribution limits remain on the same schedules. It is somewhat unclear what the tax implications will be for an individual over the age of 72 who contributes to an IRA while simultaneously taking Required Minimum Distributions. Post 70½ contributions may, however, reduce the tax advantages of future Qualified Charitable Distributions (QCDs) as there is now an offset to the value of the QCDs in the amount of the post 70½ IRA contributions.
  • Individuals may now take penalty-free IRA or retirement plan withdrawals of $5,000 for childbirth and adoption expenses. The new law allows a penalty-free withdrawal of up to $5,000 from a retirement plan account or IRA for expenses related to the birth of a child or the adoption of a child.
    • Planning Implications: Even though the withdrawal may be penalty-free (for those under 59½ years old who would otherwise pay an early withdrawal penalty of 10%), the withdrawal would still trigger income taxes, which may lessen the value of the withdrawal. Notably, however, the account owner would be able to replenish the withdrawal, over and above the standard contribution limits to “repay” him or herself for the early withdrawal.

This is not an exhaustive list. You should consult your wealth advisor along with your tax advisor to determine how the new laws may affect your unique situation. At a minimum, we strongly recommend examining your current beneficiary designations on all IRA and retirement plan accounts to ensure they still match your intended legacy goals. Managing income taxes for our clients has always been a focal point of our investment and financial planning process, and proactive tax planning can have a dramatic effect on long-term returns. We continue to work closely with our clients’ tax advisors to maximize tax savings and adhere to ever-evolving tax compliance standards.

As always, we are deeply grateful for the trust our clients have placed in our firm. We encourage you to call or e-mail anytime you would like to discuss your portfolio or other financial matters. We wish you the very best in 2020!


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