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As a result of the recently enacted SECURE Act, significant changes are coming to Roth IRAs beginning in 2023. The SECURE Act, which stands for Setting Every Community Up for Retirement Enhancement Act, was signed into law on December 20, 2019, and ushered in a wide range of changes to retirement planning.

One of the most significant changes to the Roth IRA that will take place in 2023 is the elimination of the “stretch IRA” option. Under current law, non-spouse beneficiaries of IRAs could “stretch” the distributions they receive over their lifetimes, which allowed them to continue growing the tax-free investment for decades. This change will require most non-spouse beneficiaries to distribute the accumulated assets of inherited Roth IRAs within ten years of the original owner’s death. Spouses, however, will still retain the option to inherit assets and stretch withdrawals over their lifetime.

The elimination of the stretch IRA option will impact several different groups of people, including individuals and trusts who inherit these accounts, as well as the financial advisors who handle their accounts. These new changes increase the importance of careful planning and proper estate structuring to ensure your assets are distributed in a fashion you find favorable. The good news is that Roth IRA distributions are almost always tax-free and provide a tax-free inheritance to heirs despite the stretching requirement being eliminated.

Additionally, the SECURE Act also raises the age for required minimum distributions (RMDs) from a traditional IRA to 72. This change also applies to those with Roth IRA’s; however, Roth IRAs don’t require RMDs, so owners of Roth IRAs can continue to hold assets in the account and pass them onto heirs without having to take distributions during their lifetimes.

If you have a Roth IRA or are considering opening one, it is important to discuss the upcoming changes with a financial advisor. Planning for your retirement and estate will help to ensure your heirs receive the inheritance you intend to leave and that your financial plan is best suited for you and your family. Though financial planning can be daunting, consulting with an advisor can help you to make informed decisions and prepare for whatever may come in the future of financial regulations.

In conclusion, changes to Roth IRA rules are coming, and they will require individuals and advisors to adjust their planning. The SECURE Act is not the end-all-be-all of future financial changes, so it is essential to continually stay on top of the changes. While the upcoming changes may alter one’s financial plans, they also present an opportunity to review and make adjustments to ensure a sound and secure future for years to come.