THE SECURE ACT


The Setting Every Community Up for Retirement Enhancement Act (The SECURE Act) is a piece of legislation that was signed into law on December 20, 2019. The act makes significant changes to retirement savings and distribution rules and is aimed at helping American workers save for retirement. Let’s take a closer look at the SECURE Act and what it means for retirement planning.

One of the most significant changes brought about by the SECURE Act is the increase in the age for Required Minimum Distributions (RMDs) from retirement accounts. Prior to the SECURE Act, individuals were required to start taking RMDs from their retirement accounts at age 70 ½. The SECURE Act increases the age for RMDs to age 72, allowing individuals to continue to contribute to their retirement accounts for an additional year and a half before being required to take distributions.

Another important change introduced by the SECURE Act is the removal of the age limit for traditional IRA contributions. Prior to the act, individuals over the age of 70 ½ were not able to make contributions to a traditional IRA. The SECURE Act removes this age limit, allowing individuals to continue to contribute to their traditional IRA as long as they have earned income.

The SECURE Act also introduces a new type of retirement plan, known as a “pooled employer plan” (PEP). PEPs allow small businesses to band together to offer a retirement plan to their employees, which can help reduce costs and administrative burdens. PEPs can be particularly helpful for small businesses that may not have the resources to establish their own retirement plan.

In addition to these changes, the SECURE Act includes a number of other provisions aimed at promoting retirement savings. For example, the act allows long-term, part-time employees to participate in 401(k) plans, and it expands the use of 529 college savings plans to include student loan repayments and apprenticeships.

While the SECURE Act contains many positive changes that can help Americans save for retirement, there are some potential downsides to the act as well. For example, the act eliminates the “stretch IRA” provision, which allowed non-spouse beneficiaries to take distributions from an inherited IRA over their lifetime. Under the SECURE Act, most beneficiaries will be required to take distributions from an inherited IRA within 10 years of the account owner’s death, which could result in a larger tax bill.

Overall, the SECURE Act is an important piece of legislation that contains significant changes to retirement savings and distribution rules. While there are both benefits and drawbacks to the act, it’s clear that the changes it introduces will have a significant impact on retirement planning for Americans. If you have questions about how the SECURE Act might impact your retirement plan, please feel free to reach out to me.

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