Understanding the SECURE Act
Understanding the SECURE Act
On January 1, 2020, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) became effective. The SECURE Act affects many investors who have assets in retirement plans. Here are the most important changes:
“Stretch” provision for IRAs is no more.
Before the SECURE Act, a beneficiary who received inheritance from a non-spouse (a parent, for example) could withdraw minimum distributions over the span of the beneficiary’s life. This span, which depended on a beneficiary’s age and life expectancy, could be decades long. Under the SECURE Act, however, beneficiaries must withdraw all the assets of an inherited account within ten years. The impact of this change for many beneficiaries will be a higher tax burden, which will reduce the amount received through inheritance.
Age for required minimum distribution (RMD) raised to 72.
For those individuals who turn 70 ½ in 2020 or after, the age to begin taking an RMD is now 72. The new age, a response to increased lifespans, will allow retirement assets to grow tax-deferred for an additional 18 months. It is important to note that individuals who turned 70 ½ in 2019 must follow the old rules and take an RMD in 2020.
Eliminates “maximum age” for traditional IRA contributions.
Up to and including 2019, investors had been were prohibited from contributing to a traditional IRA once they reached age 70 ½. Under the SECURE Act, an investor can contribute to a traditional IRA as long as he or she has earned income, regardless of age. As people continue to work longer (the labor force participation rate for people over the age of 65 has climbed 65% in the last 20 years), taking advantage of the ability to contribute to a traditional IRA is a meaningful retirement benefit.
With the elimination of the “Stretch” provision, Roth IRAs could become an important investment vehicle for certain investors, since distributions from a Roth are not taxed. Here are three ways to add money to a Roth IRA:
Convert your IRA into a Roth IRA via a Roth conversion. This is a taxable event; so, consider this option carefully in the context of your broader financial plans.
Contribute directly to a Roth IRA. However, this option is phased out at higher income levels.
Make Roth 401k/403b contributions into a retirement plan, if offered by your employer. Again, this option is unavailable at higher income levels.
If you have questions about the SECURE Act and how it may impact your retirement plans, we can help.
FFIC's Bill Henry Discusses Value Investing with the Wall Street Journal
In January, the Wall Street Journal interviewed our chief operating officer, Bill Henry, about value investing following 2019’s strong market performance. The interview, published on Dow Jones Newswire, discussed First Fiduciary’s investment strategy and focused on the opportunity to make long-term investments in high quality companies following small disappointments that may unfairly punish a company’s stock price.
Noteworthy Articles We've Read:
Autonomous driving and mileage
How might autonomous driving change consumer behavior? If this study by a professor from UC Berkeley is any indication, the miles driven per person will go way up. In a pilot program, the first of its kind, Mustapha Harb found that participants piled up 83% more miles than in a normal week of active driving. This difference has potentially huge ramifications for both congestion and pollution in a self-driving world.
Underwater mining
Mining companies want access to the ocean floor in international waters, which likely contains more minerals than all the continents combined. But, at what cost?
Kids TV
Do the shows toddlers enjoy affect their development? Yes, and probably more than you think. The good news: Sesame Street affects their development positively.
Salute to the wheel
A brief history of the wheel, which was invented thousands of years after several significant inventions, including sewing needles and boats.
Back pain
If you suffer from back pain, you’ll likely be interested to read why it’s so difficult to find a cure.
Disgusting foods museum
More than just a collection of revolting delicacies, Sweden's Museum of Disgusting Food says much about human nature, xenophobia, and today’s political environment.
Books We've Read:
A Most Elegant Equation: Euler’s Formula and the Beauty of Mathematics
by David Stipp
Is it possible to read a book devoted entirely to one equation and be thoroughly entertained? When that equation involves five of the most intriguing numbers in mathematics (0, 1, e, i, and π), the answer is yes. Scientist David Lipp manages to keep the reader engaged throughout, and the mini-biography of Leonard Euler (perhaps the greatest mathematician ever) was a nice addition. Quick and enjoyable read. No heavy math background required, but it helps. – AG
When Einstein Walked with Gödel: Excursions to the Edge of Thought
by Jim Holt
A collection of essays about math, physics, and philosophy, among other topics, this book is both accessible (no PhD needed!) and entertaining. The initial sections on mathematics at the beginning were the most enjoyable and introduced me to new concepts in an easy-to-digest fashion. I could have done without the last few sections of the book, which covered philosopher in-fighting. This is another book where a math background is not needed for enjoyment. – AG
Out & About
Aspen, Colorado
Almresi, 219 E Durant Ave, Aspen, CO 81611, (970) 429-6599 (www.almresi-aspen.com) is the newly opened third outlet of Alyssa Thoma’s Alpine creation. Almresi’s other locations are Metzingen, Germany and Vail. Almresi-Aspen characterizes itself as “where the Alps meet the Rockies”. The restaurant is beautifully decorated in Alpine décor, featuring rough sawn wood walls, huge cowbells and cozy mountain furnishings. The service staff is international, primarily Austrian, but also, other European and South American. The staff is attentive, friendly and helpful. The staff dress in traditional alpine apparel- dirndls for the ladies and lederhosen for the gentlemen.
While the setting is captivating, the cuisine more than lives up to the décor. As a starter, the brozeitbrett is an astonishing welcome to Almresi’s German/Austrian fare. It is a huge platter featuring air-dried beef and other charcuterie, along with flavorful cheeses, pork lard, a giant soft pretzel, fresh baked bread and vegetables. A fun alternative is cheese fondue spiked with Kirshwasser. The entrees include Austrian Hutessen (or “Eat Your Hat”). Hutessen starts with a fresh mixed salad and is followed by the presentation of a hat-shaped metal dome, heated from below, that is ready for guests to cook thin strips of beef. Once cooked, the sizzling beef is dipped in a reservoir of hearty stock and sliced vegetables. Other favorites include a perfectly prepared pork schnitzel with spätzle, delicious pasta suditrol (a Tyrolean take on pesto pasta), fantastic truffled bratwurst with cabbage, and a crispy potato pancake served with smoked salmon. The must-have desserts include “apfelstrudel” served with vanilla sauce and kaiserschmarrn, a thick shredded pancake perfect for dipping into a variety of fruity concoctions. Almresi is a delicious, fun and memorable addition to Aspen’s famous dining scene. – BH
More Than A Trusted Investment Advisor
We are happy to consult with you or your friends & family about all things related to growing & securing wealth. Recently, we assisted a client with a goal-based financial plan tailored to his family’s lifestyle. In particular, we helped determine a retirement time frame and the optimal time to begin drawing social security benefits.
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Past performance does not guarantee future results. The mention of securities or types of securities in this newsletter should not be considered as an offer to sell or a solicitation to purchase or sell any securities mentioned. Neither First Fiduciary nor the authors hold positions in any of the stocks mentioned unless otherwise stated.
First Fiduciary Investment Counsel, Inc. is a registered investment adviser with the Securities and Exchange Commission. A more detailed description of the company, its management and practices is contained in its firm brochure document, Form ADV, Part 2. A copy of this form may be received by contacting the company at: 6100 Oak Tree Blvd., Suite 185, Cleveland, OH 44131; Phone: 216.643.9100; Email: ffic@firstfiduciary.com.