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Current events provide advisors with opportunities to differentiate themselves from their peers. By being proactive and addressing current events, advisors can give clients peace of mind that their wealth is being managed properly.
Recently, the U.S. House of Representatives passed the SECURE Act (Setting Every Community Up for Retirement Enhancement), giving advisors a unique opportunity to engage with their clients on a major piece of legislation. This bill proposes significant changes to existing laws that deal with IRAs and retirement.
While the bill is under consideration in the U.S. Senate, it had overwhelming support in the House, passing 417 yeas to 3 nays (12 non-votes), and now has a real possibility at becoming law.
The SECURE Act is complex and touches many aspects of retirement, but there are four foundational elements of the new bill that will impact clients:
Of course, the details may change as the bill is scrutinized in the Senate, but there are many ways you can start having these conversations with your clients today!
The bill proposes that inherited IRAs must be depleted within 10 years. In other words, IRA holders can no longer pass on their IRAs to heirs over the heirs’ lifetime. Currently, spouses and minors are excluded from this new provision.
There is another proposal, the Retirement Enhancement and Savings Act of 2019 (RESA), which has slightly different parameters allowing for stretch provisions for accounts under $400,000. In either case, however, your clients need to be aware of this legislation.
A timeline on the liquidation of IRAs may change the way your clients save for retirement. You can build a scenario to show the impact of adopting one of these proposals or a proposal with slightly different provisions. You could even, for example, show them the value of liquidating IRAs in their lifetime and reinvesting in life insurance policies.
Any change to stretch IRAs, whether it’s the SECURE Act or the RESA Act, will have consequences for clients. Now is the time to demonstrate these changes to engage your clients.
New Employer-sponsored 401(k) Annuities
Section 204 of the SECURE Act offers 401(k) plan sponsors protection from litigation if they allow employees to choose their annuity provider and that chosen annuity provider then goes out of business or defrauds workers.
Currently, there is no safe harbor from litigation if employers offer annuities in 401(k) plans—the main reason why they aren’t offered today. This is expected to change if the SECURE Act is passed in its current form; though, there are disputes over whether simple fixed annuities, variable annuities, and fixed indexed annuities should all be included in this provision.
If clients can choose their annuity provider, it represents an ideal opportunity for advisors to step in and take a leading role in wealth management. By explaining these legislative changes and guiding clients through the process of selecting a provider, you can further establish yourself as an expert resource and reassert your value to clients.
Increasing the RMD Age and Repealing the IRA Age Cap
The SECURE Act proposes changing the RMD age from 70 ½ to 72. This is a major plus for older workers and retirees who can gain an additional 18 months of tax-deferred growth.
The age cap for IRA contributions, currently 70 ½, would also be removed in the SECURE Act. This would allow older workers to continue contributing to their IRA with a maximum annual contribution of $7,000. Those who exceed this limit can contribute to a spouse’s IRA.
The consequences of these changes will vary widely based on each client. For some clients, there may be a valuable opportunity to benefit more from their IRA for a more comfortable retirement.
Introducing your clients to these changes, as well as the new possibilities for retirement savings, can assure them you have their best interests at heart and are helping them get the most from their money.
Current Events are a Great Opportunity to Engage Clients
Try to engage your clients before the competition does—you might be able to build wallet share. Proactively approaching clients with information regarding industry trends and regulations can position you as an expert who is truly committed to helping clients get the most from their money.
Plus, having another opportunity during the year to meet your clients and find out what’s on their minds will probably uncover other opportunities as well.
The SECURE Act has a real chance of becoming law and may impact many of your clients’ plans for retirement. Show your clients how the SECURE Act may affect their savings and prove the value of your advisory services.