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A Personal Note from Cam – Dated September 22, 2021

A Personal Note from Cam – Dated September 22, 2021

September 22, 2021

A Personal Note from Cam – Dated September 22, 2021

In late December of 2019, the imaginatively named Setting Every Community Up for Retirement Enhancement (SECURE) Act became law.

The SECURE Act was intended mainly to expand opportunities for individuals to increase their retirement savings and to simplify the administration of retirement plans.

But the act also included a big unfavorable change that kneecapped the so-called stretch IRA estate planning strategy that we have used in our planning practice since its inception.

 The Stretch IRA Strategy

The stretch IRA strategy involves keeping as much money as possible in your traditional IRA or Roth IRA while you are still alive and then leaving the account to your spouse or a younger beneficiary, who keeps the inherited account rolling for as long as possible and keeps collecting the tax benefits. Thus, the term “Stretch IRA.”

The SECURE Act Imposes New 10-Year Account Liquidation Rule That Seriously Injures the Stretch IRA Strategy

Unfortunately for the estate plans of many of our successful IRA owners and the tax situations of some of their IRA beneficiaries, the SECURE Act requires most non-spouse beneficiaries to drain inherited IRAs within 10 years after the account owner’s death.

As just explained, the pre–SECURE Act required minimum distribution (RMD) rules allowed a non-spouse IRA beneficiary to gradually drain the substantial traditional or Roth IRA inherited from a grandparent, parent or other person over the beneficiary’s IRS-defined life expectancy. That deal is now off the table if someone dies in 2020 or later.

 Who Is Affected by the SECURE Act Change?

The SECURE Act’s anti-taxpayer 10-year account liquidation rule does not affect RMDs taken by original traditional IRA owners. They still operate under the same RMD rules as before.

As under pre–SECURE Act tax law, original owners of Roth IRAs need not take any RMDs for as long as they live. They are unaffected.

Beneficiaries who may want to quickly drain their inherited IRAs are also still unaffected.

Bottom line. The 10-year account liquidation rule affects only certain non-spouse beneficiaries who would otherwise keep inherited IRA accounts open for as long as possible to reap the tax advantages.   

Exception for Eligible Designated Beneficiaries

The SECURE Act’s 10-year account liquidation rule does not immediately affect accounts inherited by a so-called eligible designated beneficiary.

An eligible designated beneficiary is:

  • the surviving spouse of the deceased account owner,
  • a minor child of the deceased account owner,
  • a beneficiary who is no more than 10 years younger than the deceased account owner, or
  • a disabled or chronically ill individual.

Under the exception for eligible designated beneficiaries, RMDs generally can be taken from the inherited account over the life expectancy of the eligible designated beneficiary, beginning with the year following the year of the account owner’s death.

Other non-spouse beneficiaries, whom we will call affected beneficiaries, will be faced with the 10-year account liquidation rule.

Following the death of an eligible designated beneficiary, the account balance must be distributed within 10 years.

In addition, the account balance must be distributed within 10 years after a child of the account owner reaches the age of majority under local law.

10-Year Account Liquidation Rule Specifics

When applicable, the 10-year account liquidation rule generally applies regardless of whether you, as the original account owner, die before or after your RMD beginning date. Thanks to another SECURE Act change, the RMD rules do not kick in until age 72 if you attain age 70 1/2 after 2019. If you are in that age category, your required beginning date is April 1 of the year following the year during which you attain age 72.

And then, again thanks to other SECURE Act changes, an affected beneficiary must drain the account inherited from you by the end of the 10th calendar year following the year of your demise. Until that deadline is reached, your beneficiary can leave the account untouched.

Failure to comply with the 10-year account liquidation rule will expose the affected beneficiary to a penalty equal to 50 percent of the account balance that remains after the 10-year deadline has passed.

Reminder. As stated earlier, the SECURE Act’s 10-year account liquidation rule applies only to affected beneficiaries who inherit IRAs from original account owners who die after 2019. An IRA inherited by a non-spousal beneficiary from an original account owner who died in 2019 or earlier is unaffected, so the inherited account can still work as a stretch IRA, the same as before the SECURE Act.

If you would like to discuss how your existing beneficiary planning impacts your families long-term planning, please do not hesitate to call Trevor or me at (818) 841-1746.

Yours truly,



The information provided is not a complete analysis of every material fact and are subject to change.

Securities and some investment advisory services are offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Adviser.

Financial Planning and some investment advisory services are offered through CTA Wealth Advisors, Inc., a Registered Investment Adviser.

CTA Wealth Advisors, Inc. and Cetera Advisor Networks LLC are non-affiliated companies.

The opinions expressed in this letter are those of Cameron M. Thornton, CFP®.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Past performance does not guarantee results.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor.  Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

Cameron M. Thornton, CFP® is a Registered Representative with Cetera Advisor Networks LLC and may be reached at or
(818) 841-1746.