Maximize Retirement Savings After Passing of SECURE Act

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New legislation was passed, called the SECURE Act. Are you aware that part of the legislation states that inherited IRAs need to paid out over 10 years instead of being stretched over a lifetime, as it stood prior to the law change? This means that you could have spent up to 40 years saving money for retirement, only for the government to potentially get 30-40% of this savings 10 years after the second death of a married couple.

An inherited IRA is the amount of assets left after the married couple passes. Typically the proceeds go to the children.

There are several options to consider with this new legislation when it come to the inherited IRAs:


1.  Use Life Insurance to Cover the Income Tax

  • One solution for maximizing your retirement savings is to buy a life insurance policy now with the IRA funds to cover the income tax due from the inherited IRA. For example, if $500,000 is left in your retirement account after 10 years, the $500,000 will be added to the income of the individual(s) receiving the inherited IRA. At today’s rates that could be as much as 40% depending on the state of residence of the beneficiary. The life insurance proceeds can go to the beneficiary tax-free and then those proceeds could pay the tax due. Consult your financial planner to see if this could be an option. The applicants must be able to qualify for the benefit medically.

2.  Take the Lump Sum

  • While this is not recommended, it is an option. In our opinion, this is the worst option for taxation.

3.  Spread the Payments Over 10 Years

  • This tactic can reduce taxation in the first 10 years. Then you may take the lump sum in year 11. Also, this will allow for the money to be invested during the 10-year period.


You should consult with your tax advisor and/or financial planner to make the appropriate decisions based on your situation. Your tax advisor should be the person to provide with the exact tax consequences of your decision.


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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.


They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you.


In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs.


Guarantees are based on the claims paying ability of the issuing company.


This is a hypothetical example and is not representative of any specific investment. Your results may vary.

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