Kissing the Security Blanket Goodbye: How the SECURE Act Will Affect IRA Beneficiaries’ Long-Term Financial Security

Abstract

The Setting Every Community Up for Retirement Enhancement Act (the SECURE Act) offers many forms of new support for retirement savings to help more Americans better prepare for their retirement. It also includes a provision that eliminates the stretch payout option for the beneficiaries of inherited individual retirement arrangements (IRAs). Prior to the SECURE Act, beneficiaries of inherited IRAs were able to capitalize on the tax-deferred savings vehicles for the remainder of their lifetimes. After the SECURE Act, the period of tax-deferred investment for beneficiaries was limited to ten years. In eliminating the stretch payout option, Congress opted for a relatively small amount of short-term revenue rather than the long-term financial security of both the IRA owner and the beneficiaries of the IRA based upon closing a perceived loophole. This decision ultimately will generate a small amount of revenue, while simultaneously having a largely detrimental impact on the beneficiaries of inherited IRAs. This Note argues that Congress should reinstate the stretch payout option for the beneficiaries of inherited IRAs to encourage saving and, in turn, protect retirees and their beneficiaries.