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By Sarah Brenner, JD
Director of Retirement Education

On July 15 and 16, financial advisors from around the country gathered virtually for Ed Slott and Company’s Instant IRA Success workshop. We took a deep dive into the rules governing retirement accounts and engaged in some lively discussions of issues that advisors on the front line are facing regularly as they help their clients plan for a secure retirement. Here are five takeaways to share from our recent meeting:

1. The SECURE Act has upended retirement planning. The SECURE Act became a reality in 2020 and with it came the end of stretch IRA for most IRA beneficiaries. In its wake are many questions about the new rules and where to go from here when it comes to transferring wealth to the next generation. At the workshop, there was much discussion as to the correct interpretation of the new 10-year payment rule, especially in light of the recent confusion related to Publication 590-B. In its revision to that publication, the IRS had to make revisions to correct the impression that RMDs would be required during the 10-year period. It is clear as well that there is a lot of interest from both advisors and retirement savers in potential replacements for the stretch IRA, such as life insurance or charitable trusts.

2. Many believe we are headed for tax increases. There is much uncertainty when it comes to tax planning right now, stemming from concern that today’s rates won’t be around long. Several informal polls taken during the meeting show that many advisors believe that the historically low income tax and federal estate tax levels are likely to rise in the near future.

3. The Net Unrealized Appreciation (NUA) tax break is currently generating a lot of interest as markets boom. The NUA tax break allows plan participants who take lump sum distributions, including in-kind distributions of highly appreciated employer stock, to take advantage of favorable capital gains tax rates. With markets way up and many taking early retirement due to the pandemic, this is a perfect storm for NUA.

4. IRA trusts may be less useful, but for some IRA owners they will still be needed. The SECURE Act may have downgraded trusts as a planning strategy for IRAs with the new 10-year rule for most beneficiaries including trusts. However, advisors recognize that for some situations like minor beneficiaries, special needs beneficiaries and those with credit issues, a trust still may be a good choice. Advisors and their clients are eagerly waiting on SECURE Act guidance from the IRS to fill in the gaps on how the rules for trusts as IRA beneficiaries will work going forward.

5. Roths still rule. Roth accounts were the subject of lots of attention during the workshop. We had discussions about the recent news reports of a tech titan’s multibillion Roth IRA, stories of continued client interest in Roth conversion, and reports of Congress’ move toward more “Rothification.” Knowing the rules, including the often confusing five-year rules for tax-and -penalty-free distributions, is more important than ever.

Thank you to all who attended Instant IRA Success and made it a great event for everyone! If you could not make this past workshop, consider joining us for our next virtual Instant IRA Success workshop which will be held on September 23 and 24.

https://www.irahelp.com/slottreport/5-takeaways-ed-slott%E2%80%99s-instant-ira-success-workshop