Understanding the SECURE Act
Retirement is a major milestone for the working population and planning for it wisely decides the quality of life post-retirement. The passing of the SECURE Act has been a ray of hope for many Americans as it facilitates better retirement savings.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed as a law on December 20, 2019. The aim of the act is to help the workforce have better savings by the time of retirement and have more clarity on how the funds may be used. In effect, it paves the way for improved wealth management.
How the SECURE Act is beneficial
- Age restriction relaxed for IRA contributions
Before the law was passed, the maximum age for traditional IRA contribution was 70 ½. The SECURE Act gives provisions for people to contribute after the age of 70 ½ if they are working. This has been an advantage in the present scenario where individuals opt for extended careers.
- Advantages to small businesses
The SECURE Act lets small business owners offer a 401(k) plan that is as good as the ones existing in big companies. Presently, there aren’t many benefits for workers in small businesses be it health care plans or other planning tools. This act will provide the owners with better incentives to let the workforce enjoy the privilege of good retirement plans.
- Participation of part-time workers
The rules regarding the retirement plans for part-time workers were changed as part of the SECURE Act. Under the act, part-time workers are made to participate in 401(k) plans. The employees are eligible if they have worked more than 1,000 hours in one year or 500 hours of service every year for three successive years. Before the act, they were ineligible for the plan if the working hours were less than 1,000 per year.
- Minimum distribution age increased to 72
The minimum age to start withdrawing from the retirement account was 70 ½ previously. Known as Required Minimum Distributions (RMD), the first withdrawal was to be made by April 1 after you turn 70 ½. Now with the SECURE Act, the age has been raised to 72 making individuals eligible for tax benefits for some more time.
Why the Act Came Into Effect?
Americans have been facing challenges in investing for retirement for a long time. Reports suggest that there are many people with no retirement savings at all. One of the reasons for the problems is the change in plans where the employers no longer guarantee retirement benefits to the employees. Instead, the employees were made responsible to save for their lives after retirement. Also taking into consideration the growing inflation and longer life expectancies, a law to address the retirement issues was the need of the hour. Hence the SECURE Act.
How the secure act will impact the lives of retired people is yet to be seen. But we agree that it is definitely a positive step towards a solution for the retirement crisis.
Contact an Estate Planning Attorney Today
If you have questions how the SECURE Act will impact your retirement, contact Tampa estate planning attorney David Toback today to schedule a consultation.