Record numbers of IRA/401k millionaires and the SECURE Act

Here is the headline that caught my attention this morning:

There’s now a record number of 401(k) and IRA millionaires, according to Fidelity (click to view the article)

Not surprising.

Oh, did you notice the big IRA/retirement plan law changes at the end of 2019?  The SECURE Act?

Let me put this very succinctly.  Quietly, Congress made a few major changes to IRAs and retirement accounts with the SECURE Act.  Mainly, they sought to encourage people to have more retirement savings (like required minimum distributions now start at age 72, not 70.5; if you are working past age 70.5,  you can now continue to add to your IRA as long as you have earned income; and a few other points).

But, there is one huge change that runs right into the article above – Congress finally killed the Stretch IRA!

Look it up online – even though IRAs and other retirement accounts are heavily taxed, the big solution offered to large IRA account holders has been the so-called Stretch IRA.  These plans allowed the IRA account holders to choose a child or grandchild to inherit the IRA but then take the funds out over the recipient’s life expectancy – which could be a really long time.  This was the gold standard solution that lawyers to offered their clients.

Now those plans are trash! New law requires most recipients to take out the inherited IRA funds within 10 years!  Not so great for million dollar IRAs going to younger people – for lots of reasons.

Anyway, if you are interested in hearing my take on the new law, and some opportunities it offers the nonprofit world, click here to check out my recent webinar on the topic.


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