In response to growing concerns over the state of retirement in the country, President Trump signed the SECURE Act into law just last month. Most provisions of the bill take effect in 2020, so here’s a quick review of what we can expect.
Access to a retirement plan, for those who don’t have one. About 31 percent of Americans don’t have access to a retirement plan at all. Now, the SECURE Act will require businesses to open their retirement plans to part-time workers who accumulate at least 1,000 hours per year, or 500 hours for three consecutive years.
Small businesses will be offered incentives to start retirement plans for their workers, through a tax credit that offsets startup costs and another credit when automatic enrollment is offered.
New options for those who do have a retirement plan. Certain provisions of the SECURE Act will encourage employers to offer annuity options within their 401(k) plans. If that option appeals to you, look for it on the horizon within the next year.
You can leave money in your IRA longer. Previously, IRA holders were required to begin minimum distributions at age 70 ½. Now you can leave your money in the account, where it can continue to grow, until age 72. If you’re still working and do not own more than 5 percent of the company, you can postpone withdrawals until you actually retire.
You can continue making IRA contributions as long as you want to. With many Americans continuing to work well into their seventies, why place a limit on contributions? Now, contributions don’t have to stop at age 70 ½. As long as you’re still earning income, you can contribute to your IRA.
Earlier taxes on inherited IRAs. If you plan to pass your IRA on to your children, or if you stand to inherit one from an aging parent, you should pay attention to this change. As of 2020, you won’t be able to stretch out withdrawals from an inherited IRA indefinitely. You must use the money within ten years. This rule does not apply to spouses or disabled people who inherit the account, however.
If you have questions on how the SECURE Act might impact your own retirement plans, don’t hesitate to call us. We can help you understand all provisions of the new law, so that together we can make any necessary changes to your strategy.