How The SECURE Act Affects Your Retirement

The Setting Every Community Up for Retirement Enhancement Act of 2019, also known as the SECURE Act, which originally passed the House in July, was approved by the Senate on Dec.19, 2019, and signed into law on Dec. 20 by President Donald Trump. I am not going to dig too deep into the knitty gritty of this bill but I will hit some of the main points that will affect most people. The good news is that almost all the provisions of this bill are meant to make retiring easier for the general public. It has been commonly known for sometime now that many Americans are simply not prepared for retirement. According to Vanguard, the 2019 median 401(k) balance for those ages 65 and older was just $58,035. This amount doesn’t go very far, especially with the rising costs of healthcare and other expenses that become relevant in retirement. This bill should make it a little easier to make our money last. This is becoming even more important as people are starting to live longer. One of the main highlights is that this bill will move RMD’s (Required Minimum Distributions) to age 72 instead of 70 and ½. Let me translate that for you. For most retirement accounts ( TSP, 401(k)’s, IRA’s ect), you don’t pay any taxes until you take money out during retirement. So the longer you keep your money in these accounts, the longer your money can grow without paying taxes. Once you hit the age when RMD’s are required, the government requires that you take out a portion of your retirement account balance. They do this to make sure that they get their piece of the pie in the form of taxes. This change allows individuals to wait until 72 before taking distributions. This gives people another year and a half to grow their money before paying taxes on any of it. Another provision of this bill makes it easier for businesses to offer 401(k)’s to their employees. The government now offers certain tax credits to those businesses that offer a 401(k) or SIMPLE IRA with automatic enrollment. They also made it easier for employers to allow part-time employees to participate in these plans. The bill touches on many more areas of retirement that I won’t mention here. This article is less about explaining every detail and more about introducing you to the main points. There are great online resources for those that would like to dig a little deeper. See links below: https://www.investopedia.com/what-is-secure-act-how-affect-retirement-4692743 (https://www.investopedia.com/what-is-secure-act-how-affect-retirement-4692743) https://www.marketwatch.com/story/with-president-trumps-signature-the-secure-act-is-passed-here-are-the-most-important-things-to-know-2019-12-21 (https://www.marketwatch.com/story/with-president-trumps-signature-the-secure-act-is-passed-here-are-the-most-important-things-to-know-2019-12-21) This bill is far from a fix-all for all of America’s retirement problems, but it is a step in the right direction. Regardless of what the government does, it is important to remember that it is our responsibility to ensure our success in retirement. There are many great tools that aid in retirement planning, but it is up to us to take advantage of what is available and plan for success.