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Secure Act Impacts Retirees and Savers

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The president signed into law late last year the SECURE Act, which stands for “Setting Every Community Up for Retirement Enhancement,” a significant piece of legislation that makes sweeping changes affecting many retirees and savers.

Note that many estate plans contain provisions related to retirement accounts and have references to “required minimum distributions (RMDs)” – these plans should be reviewed to ensure that the SECURE Act’s changes to those rules don’t have an unexpected impact on your plans.

Here is a quick review of what the SECURE Act does:


    1. Expands the ability of small employers to band together to offer 401(k) plans – which some don’t offer due to high compliance costs. The bill allows multiple employers to spread the cost of one plan across a larger base of assets/accounts.
    2. Expands investment options inside 401(k) plans to make it more likely to have annuity options inside a plan.
    3. Changes the age for “required minimum distributions” from IRAs and 401(k) from the current 70½ to age 72.
    4. Permits persons over age 70½ to make contributions to a traditional IRA.
    5. Provides a tax credit to certain smaller employers to encourage automatic enrollment into their retirement plan.
    6. Adds a new exemption from the 10% penalty tax for withdrawals connected to a ‘qualified birth or adoption
    7. Requires that defined contribution plans (most 401(k) plans and 403(b) plans) deliver a “lifetime income disclosure” to participants at least once every 12 months – to help people understand and plan for retirement.
    8. Makes significant changes to “stretch IRAs,” causing many inherited IRAs to terminate after only 10 years after the death of the original IRA owner.


A summary chart of some of the impact the SECURE Act makes to IRA planning accompanies this commentary. Clients who wish to further discuss the impact on their investments should contact their Commerce Trust Company relationship manage

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Commerce Trust Company is a division of Commerce Bank. Commerce Brokerage Services, Inc., member FINRA and SIPC, and an SEC registered investment advisor, is a subsidiary of Commerce Bank.

This material is not a recommendation of any particular security, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified attorney, tax advisor or investment professional. The information in this commentary should not be construed as an individual recommendation of any kind. Strategies discussed here in a general manner may not be appropriate for everyone.

Diversification does not guarantee a profit or protect against all risk. Past performance is no guarantee of future results, and the opinions and other information in the investment commentary are as of December 20, 2019.

Commerce does not provide tax advice or legal advice to customers. Consult a tax specialist regarding tax implications related to any product or specific financial situation. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. All expressions of opinion are subject to change without notice depending upon worldwide market, economic or political conditions.

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