The SECURE Act and How It Could Affect Your Retirement

January 17, 2020

As part of a larger government spending package, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) was recently signed into law.  The Act includes many provisions and reforms aimed at making saving for retirement easier and more accessible.

The Secure Act changes several provisions related to tax-advantaged retirement accounts. 

Most provisions in the law went into effect on January 1, 2020.

Key Takeaways to the Act include:

  • Repeals the maximum age for traditional IRA contributions, which currently is age 70½.  You can continue to make contributions to traditional IRAs, provided you have earned income.
  • Increases the required minimum distribution age for retirement accounts from age 70½ to 72, for those who are not 70½ by the end of 2019.
  • Distributions from an inherited IRA must now be taken within ten years.  Previously, distributions could be taken over your single life expectancy.  The new law applies to those passing away on or after January 1, 2020.  Exceptions are included for a surviving spouse and a minor child.
  • Many part-time workers will be eligible to participate in an employer sponsored retirement plan.  Any employee who worked more than 1,000 hours in one year, or 500 hours over three consecutive years may now be eligible.
  • Employers can receive a tax credit for starting a retirement plan, up to $5,000, subject to certain limitations.
  • Allows withdrawal up to $10,000 from 529 plans for repayment of student loans.  
  • Permits penalty free withdrawals of $5,000 from 401(k) accounts to defray the costs of having or adopting a child.

Because many of these changes are complex and involve long-term strategies, it is still important to consider the impact on your overall financial plan.

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Changes in the tax code and your own financial circumstances are common.  Planning is an ongoing process. 

Please contact us to discuss your unique situation.