Don't Be Deceived By New Tax Law's Name

Published Tuesday February 18, 2020,  4:30 p.m. ET

(Tuesday February 18, 2020,  4:30 p.m. ET)  - With tens of millions of Americans desperately seeking security in retirement, Uncle Sam should have been more careful about how he named the new tax law, known as the SECURE Act. Instead of co-opting the names of federal laws for marketing purposes, the U.S. government should be able to figure out how to name a new law that skirts the standards in federal truth-in-advertising regulations.

Gaming the name of the Setting Every Community Up for Retirement Enhancement Act, so it can be abbreviated "SECURE," misleads retirement investors. The SECURE Act increases fairness of rules governing federally qualified retirement plans -- IRAs, Roth IRAs, 401(k)s, and other federally tax-deferred retirement accounts. It's loaded with technical corrections and would be better named, "The 2019 Technical Corrections Act For Retirement Investors," or something as instructive to taxpayers.

Consumers should not be required to read between the lines to figure out how the name of a tax law about retirement investing affects them. The names of tax laws should meet plain-English standards imposed by the government's own truth-in-advertising rules. They should at least hint at whether a law will save taxpayers and their heirs from overpaying the IRS on retirement income annually, materially and needlessly, or cost them more.

The SECURE Act is a highly technical area of tax and financial planning, and minimizing its effects requires analysis of your personal situation, but don't let the acronym fool you. The SECURE Act's effects sweep across rules that could allow you to delay required minimum distributions from qualified accounts an extra 18 months, to age 72 instead of 70½, which has been a huge bonus to baby boomers nearing retirement, as well as those in the retirement account decumulation and withdrawal phase of life.

The SECURE Act does not do much to make your retirement more secure. In fact, failing to plan for its myriad technicalities affecting Roth IRA conversions, new limits on inherited federally qualified accounts, and the benefits of life insurance is liable to make your retirement less secure. Don't be deceived.

This article was written by a veteran financial journalist. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment, and past performance is never a guarantee of your future results.

This article was written by a professional financial journalist for Collie Financial Planning, Inc and is not intended as legal or investment advice.

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