How Does The SECURE Act Affect Your Retirement?


At the end of last year, Congress passed the SECURE Act. It took effect December 31, 2019, and changed the rules governing individual retirement plans including Roth IRAs, defined contribution plans, defined benefit plans, and 529s.

Some key provisions of the Act are summarized


  • Raises the required beginning age for mandatory retirement account distributions from 70½ to 72.
  • Eliminates a maximum age for contributions, using income earned from work.
  • Requires Designated Beneficiaries (who are not EDBs, defined below) to receive distribution of an inherited retirement account within ten years of death of the account owner. This category includes adult children and grandchildren of the account owner, as well as “see-through” trusts.
  • Establishes a special class of designated beneficiaries, called Eligible Designated Beneficiaries (EDBs) which are given tax-favored treatment. The EDBs are:
    • A spouse of the account owner. The spouse can elect a distribution over his or her life expectancy, or rollover the retirement account into the spouse’s own retirement account.
    • A minor child of the account owner. The minor is not subject to the 10 year distribution rule until the minor reaches the age of majority, or completion of a “specified course of study” (yet to be defined) at age 26.
    • Disabled and chronically ill beneficiaries.
    • Beneficiaries not 10 years younger than the account owner (such as an older or younger sibling).
  • Eliminates the 10% early retirement account withdrawal penalty for distribution of up to $5,000 for birth or adoption of a minor person (other than by a step-parent).
  • Eliminates the 10% early withdrawal penalty for distribution of up to $10,000 from a 529 plan for repayment of the beneficiary’s student loans.

Existing trusts should be reviewed to determine if they work as intended in light of the new law. For example, a “see-through” trust set up to ensure lifetime distributions to a minor beneficiary will, under the SECURE Act, be paid out to the beneficiary by age 28 or 36, rather than over a lifetime.

You may wish to consider the pros and cons of an accumulation trust as a tool to delay distribution of your retirement assets beyond your child reaching age 28 or 36. If there is concern about a beneficiary’s potential for a contested divorce, money mismanagement, substance abuse, addiction, etc., an accumulation trust may be worth exploring.

We encourage you to be in touch with a member of our Trusts and Estates Department to update your estate plan in light of the SECURE Act. (April 7, 2020)