In A Congressional Money Grab, The SECURE Act is Set to Destroy the Financial Legacies of Millions who Diligently Invested in IRAs & Retirement Plans, per James Lange

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The SECURE Act's fine print spells massive income-tax acceleration for the families of IRA and retirement plan owners and it is set to become law effective January 1, 2020. Source: James Lange of Lange Financial Group, LLC

Lange Financial Group, LLC

The House of Representatives has attached the SECURE Act, which could be more appropriately called the Extreme Death-Tax for IRA and Retirement Plan Owners Act, to a fiscal year 2020 appropriations bill. In order to avoid a government shutdown, the appropriations bill needs to be passed through both houses and signed by the President this week.

This is a huge step towards the bill becoming the law of the land and the imminent passage of this devastating legislation deserves the attention of every IRA and retirement plan owner who cares about preserving their financial legacy.

James Lange, Attorney/CPA has been on the forefront of this issue for years, first sounding the alarm in the 2015 second edition of his flagship book Retire Secure! He even went on to write Retirement Plan Owner’s Guide to Beating the New Death Tax, a book specifically on how to mitigate the SECURE Act’s potentially dire consequences. And, now that the SECURE Act is almost guaranteed to become law effective January 1, 2020, many IRA and retirement plan owners should consider taking some of the actions Mr. Lange advises before year-end.

The consequences of this bill will be devastating to people who have worked hard their entire lives, played by the rules, and accumulated significant amounts of money in their IRAs and retirement plans. It will be even more devastating for IRA owners whose IRA and/or retirement plan constitutes the biggest asset in their estate according to Lange. This proposed massive acceleration of taxes really betrays those conscientious savers who socked money away under the assumption that they would be able to pass that money on to their children in a tax efficient manner.

Under current law, a non-spouse beneficiary of an Inherited IRA can “stretch” distributions from the inherited IRA over the course of his or her lifetime. By limiting the taxable minimum required distributions of the inherited IRA over a lifetime, the beneficiary receives enormous benefits in the form of deferred income taxes known as “the stretch IRA.” Using the “stretch” means the beneficiary can keep the bulk of the assets in the tax-deferred environment (for inherited traditional IRAs) or tax-free environment (for inherited Roth IRAs) to some extent over the course of their lifetime. The distributions from a traditional Inherited IRA are taxable. The longer a beneficiary can minimize taxes on the distributions the better. The longer he or she can keep assets in the tax-free Roth environment, the better.

Under the SECURE Act, subject to exception, the entire traditional IRA or retirement plan would have to be distributed and taxed within 10 years of the death of the IRA owner. The entire inherited Roth IRA, though tax-free, would still have to be liquidated within 10 years of the IRA owner’s death. The most important exception to that rule is to the surviving spouse. There are also limited exceptions for minors and individuals with disabilities.

The SECURE Act’s revisions represent a huge and fundamentally negative change for Inherited IRA owners because eliminating the rules that allow them to stretch distributions over their lifetimes robs them of decades upon decades of tax-deferred or tax-free growth. And, it subjects the beneficiaries of traditional (tax-deferred) retirement plans to massive income-tax acceleration.

Lange did some calculations to determine the difference between leaving a million-dollar traditional IRA to a child under the existing law, and under the SECURE Act. Depending the on the assumptions you use, Lange found at age 86, the beneficiary with the existing law in place still has over $2,000,000. By contrast, under the SECURE Act, using the same assumptions, the beneficiary has $0.

So the difference between having over $2,000,000 and being broke can be accounted for in how quickly the beneficiaries were forced to pay income taxes on their inherited IRAs. The beneficiary who has the opportunity to “stretch” those payments out over his own lifetime is literally millions of dollars better off in comparison to the beneficiary who had to pay those taxes within 10 years and who ran out of money as a result.

If you have a substantial IRA and are furious about this pending law, you can be furious at both Democrats and Republicans in the House of Representatives who passed the bill back in May by a 417 to 3 margin. You can also direct your fury towards the Senate that will inevitably pass it as well as President Trump who will almost certainly sign it.

The bill has been promoted as an “enhancement” for IRA and retirement plan owners because it includes some “Trojan Gift Horse” provisions that, subject to exception, are relatively insignificant for most taxpayers. One provision that the politicians and lobbyists are crowing about is that the bill will make it easier to give insurance companies access to employer’s 401(k) plans. Of course, the insurance industry is jumping up and down for joy at the thought of selling so many more annuities.

To be fair, there are a few other minor benefits that will allow some employees to make higher contributions to their retirement plans. The only provision that we think is worthwhile to most taxpayers is the bill extends the existing minimum required distribution age from 70 and ½ to 72.

It is also important to note that none of the proposed changes apply to accounts inherited by the surviving spouse. A planning tip for older unmarried committed couples: “getting married for the money” will be much more attractive after the law passes.

So, what can many, if not most, IRA and retirement plan owners do to respond to these impending changes? How can they protect the financial legacy they hope to leave for their children and grandchildren?

Of course, no blanket recommendations will cover every IRA and retirement plan owner. But we have developed multiple defenses against the SECURE Act that, if appropriately deployed, could reduce negative impact that this law would have on the financial legacies of millions of retirement plan owners across the country.

Jim has been quoted 36 times in The Wall Street Journal, has written 6 best-selling financial books, including Retire SECURE! and The Roth Revolution which have been endorsed by dozens of industry greats including Charles Schwab, Larry King, Ed Slott, Roger Ibbotson, Jane Bryant Quinn, Burton Malkiel and 60 other IRA, legal, and financial experts.

If you are interested in interviewing Jim for the radio or t.v., media samples are available at

Jim, a former radio talk show host, comes media-trained and wants to share his expertise with your audience.

Erika Hubbard
412-521-2732, Ext. 224

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Erika Hubbard

Sandy Proto
since: 04/2009
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