If you have an Individual retirement account (IRA) or a 401k account, get ready for some big changes that could potentially impact your retirement savings. The passage of the SECURE Act in December 2019 has ushered in several key modifications to retirement accounts, designed to make it easier for individuals to save for retirement and to improve their overall retirement security.

One of the most significant changes brought about by the SECURE Act is the increase in the age at which individuals must start taking Required Minimum Distributions (RMDs) from their retirement accounts. Previously, individuals were required to start withdrawing funds from their IRAs and 401k accounts at age 70 ½. Now, the age for starting RMDs has been increased to 72, giving individuals an extra 1 ½ years before they have to start tapping into their retirement savings. This change allows individuals to benefit from the tax-deferred growth of their retirement accounts for a longer period of time.

Another major change brought about by the SECURE Act is the elimination of the “stretch IRA.” Previously, beneficiaries of IRA accounts were able to stretch out the distributions over their lifetimes, allowing for continued tax-deferred growth of the assets. However, under the new rules, most beneficiaries will be required to withdraw the entire inherited IRA within 10 years of the original account holder’s death. This change has significant implications for both account holders and their beneficiaries, as it could result in higher tax liabilities and a faster depletion of the inherited assets.

Additionally, the SECURE Act has made it easier for small businesses to set up retirement plans for their employees by providing tax incentives and increasing the tax credit for small businesses that adopt new retirement plans. Employers can now also automatically enroll their employees into retirement plans, increasing the likelihood that more individuals will save for retirement.

While these changes may have significant implications for individuals with IRAs and 401k accounts, it is important to consult with a financial advisor to understand how these changes may impact your specific situation. By staying informed and making necessary adjustments to your retirement savings strategy, you can ensure that you are well-prepared for a secure and comfortable retirement.

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