By the ROI Development Committee
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted in December 2019 and was effective as of January 1, 2020. This legislation marks the most significant changes to retirement security since the Pension Protection Act of 2006.
The SECURE Act has three major components. First, you can now contribute to your Individual Retirement Account (IRA) past the age of 70½. Second, you do not have to take the required minimum distribution (RMD) until the age of 72. And third, most non-spouse IRA and other retirement account beneficiaries must withdraw the entire amount within 10 years.
Prior to the SECURE Act, you could not contribute to your IRA past the age of 70½. This age limit has been repealed. Thus, you can save for retirement for a longer period of time to build up your retirement account. The SECURE Act changed the age at which you must start taking RMDs from your retirement account from 70½ to 72. This change gives your account additional time to grow. Notably, for those born before July 1, 1949, the previous rules apply. Contributors who turned 70½ in 2019 or earlier will have to continue to take required minimum distributions.
But you do not need to wait until you are 72 to make contributions to those causes you care about. If you are 70½ or older, you can still transfer any amount up to $100,000 per year directly from your IRA to a qualified nonprofit, tax-free. The gift does not count as income, so you benefit whether you itemize on your tax returns or not. The Radiation Oncology Institute (ROI), ASTRO’s research foundation, is a qualified nonprofit and can assist you in making this gift. The ROI will provide a sample letter for you to customize and use to communicate with your IRA administrator. By making a gift to the ROI now, you can see the impact of that gift on research in radiation oncology.
Making a gift from your IRA is an opportunity to leverage your most highly taxed assets. When IRAs are passed to loved ones, distributions from these accounts are subject to income taxes at the beneficiary’s ordinary income tax rate, which can be as high as 37% plus state income tax, depending on where they live. Rather than leaving these heavily taxed assets to family, consider giving from these accounts now and letting the value of other assets grow and eventually pass to loved ones.
Spouses can continue to stretch payments from inherited IRAs and other retirement accounts over their lifetimes. However, most non-spousal beneficiaries (such as grown children) must withdraw the entire IRA balance by the end of 10 years. If you do not want your non-spousal beneficiaries to receive their entire IRA proceeds by the end of 10 years because it creates tax issues for your loved ones, you may want to consider creating a Charitable Remainder Trust (CRT). You can stretch your inheritance by naming a CRT as a beneficiary of an IRA, and the IRA funds the trust after your death. The trust is designed to pay one or more beneficiaries’ income for life (or a term of up to 20 years) and at the end pay a remainder benefit to a charity of your choice. This will allow the beneficiaries to receive payments past the 10 years.
With the SECURE Act, some provisions of retirement plans change, but many aspects remain the same. You can name the ROI as a beneficiary of your IRA. You are encouraged to notify the ROI of your designation so that the ROI can thank you and can ensure that your gift is used exactly as you intended.
If you have questions about the impact of the SECURE Act, we encourage you to make an appointment with your financial advisor. The advisor can answer other questions you have and can review your plans (including your beneficiary designation) and ensure that your wishes are documented.
The information in this article is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. References to tax rates include federal taxes only and are subject to change.
2020 ROI Development Committee:
J. Frank Wilson, MD, FASTRO, co-chair, Medical College of Wisconsin; Timothy R. Williams, MD, FASTRO, co-chair, Boca Radiation Oncology Associates; Shauna Campbell, DO, Cleveland Clinic; Drew Moghanaki, MD, MPH, Atlanta VA Health Care System; Jason Efstathiou, MD, PhD, Massachusetts General Hospital; Daniel Moore, Radiation Business Solutions; Charles Enke, MD, University of Nebraska Medical Center; Arul Mahadevan, MD, Wentworth-Douglass Hospital, Seacoast Cancer Center; Jenna Kahn, MD, VCU Medical Center; Douglas Martin, MD, The Ohio State University Wexner Medical Center; Join Y. Luh, MD, Dr. Russel Pardoe Radiation Oncology Center, St. Joseph Hospital; Malika Siker, MD, Medical College of Wisconsin