With the introduction of the Setting Every Community Up for Retirement Enhancement (SECURE) Act — which brought the most significant changes to retirement plans in over a decade — you may be wondering how your saving strategies might change.
A key change relates to the people you name as your beneficiaries.
Previously, all beneficiaries could take distributions throughout their lives. The SECURE Act preserved this option for spouses, but repealed it for most non-spousal retirement plan beneficiaries. This group will now have to withdraw the entire amount by the end of ten years after your passing. When they take any distribution, they will still pay income tax at their ordinary income tax rate.
If you would rather have your non-spousal beneficiaries receive their IRA proceeds over their lifetime, you can:
- Designate a nonprofit to establish a charitable gift annuity (CGA) or
- Name a charitable remainder trust (CRT) as the beneficiary.
After your lifetime, the retirement plan account proceeds will be used to fund the CGA or CRT. Not only is this a great tax strategy, but you can use your retirement account to spread the distributions over a beneficiary's lifetime and ultimately support a charitable organization, such as St. Edward's University, as well.
How They Work
CGA: You name one or two beneficiaries to receive fixed payments from the CGA for life. The rate of payment (determined by the ages of the beneficiaries) doesn't fluctuate with the stock market, interest rates, or inflation. After the beneficary's lifetime, the remaining balance is used to fulfill our mission.
CRT: You name one or more beneficiaries to receive payments from the CRT over their lifetimes or a term of up to 20 years. Beneficiaries can receive either a fixed amount (annuity trust) or a variable amount (unitrust). At the end of the term, the remaining balance goes to the university.
Talk with your Adviser
If you have questions about the impact of the SECURE Act on your retirement plans, make an appointment with your financial adviser. They can review the plans you have in place (including your beneficiary designations) and help make sure you are on the right track.
We Can Help
We are so grateful for your generosity. Please contact Gregory Perrin, associate vice president for development and alumni relations at firstname.lastname@example.org or 512-448-8452 to discuss how your gift can help provide scholarships and support for Hilltoppers.