Rick Kahler, CFP, resides in Rapid City, South Dakota and is a fee-only financial planner. He is the co-author of “The Financial Wisdom of Ebenezer Scrooge”. Learn more at …(read more)

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The SECURE Act Details and Your retirement planning

retirement planning is a crucial aspect of one’s financial journey. It ensures that individuals can enjoy their golden years without financial worries and live comfortably. To make this process more secure and beneficial for American workers, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed in 2019. This landmark legislation brings several changes that could impact your retirement planning.

One of the most significant changes under the SECURE Act is the increase in the age for required minimum distributions (RMDs). Previously, individuals were required to start taking distributions from their retirement accounts, such as 401(k)s and traditional IRAs, at the age of 70½. However, the SECURE Act has now increased the age to 72. This change allows individuals to continue growing their retirement savings for a few more years before mandatory withdrawals begin.

Furthermore, the SECURE Act has eliminated the age restriction for contributing to traditional IRAs. Previously, individuals were prohibited from making contributions once they reached the age of 70½. However, this restriction has been removed, allowing individuals to continue saving for retirement as long as they are earning income.

Another notable change under the SECURE Act is the introduction of new rules for inherited retirement accounts. Before the Act, beneficiaries of inherited retirement accounts, such as IRAs, could “stretch” distributions over their lifetime, maximizing the tax benefits. However, under the new rules, most beneficiaries must withdraw the entire balance of the inherited account within 10 years of the original owner’s death. This change may have significant tax implications and requires careful planning to minimize the impact on beneficiaries.

Additionally, the SECURE Act aims to expand access to employer-sponsored retirement plans for part-time workers. Previously, employees who worked less than 1,000 hours per year were generally ineligible to participate in employer-sponsored plans. However, the new legislation requires employers to include long-term part-time workers who fulfill specific criteria in their retirement plans. This change will provide more workers with the opportunity to save for retirement and secure their financial future.

Furthermore, the SECURE Act includes several provisions to promote retirement savings, especially for small businesses. It offers tax credits to businesses that adopt or start new retirement plans, making it more affordable for employers to provide retirement benefits to their employees. Additionally, it allows small businesses to join together and form Multiple Employer Plans (MEPs), which can reduce administrative costs and increase investment options for participants.

Overall, the SECURE Act brings about significant changes to retirement planning in America. From increasing the age for required minimum distributions to altering rules for inherited retirement accounts and expanding access to employer-sponsored plans, these amendments create both challenges and opportunities for individuals planning their retirement. It is essential to be aware of these changes and consult with a financial advisor who can help navigate through the complexities of the SECURE Act and tailor a retirement plan that suits your individual needs and goals. By staying informed and taking advantage of the new provisions, you can enhance your retirement savings and secure a financially sound future for yourself and your loved ones.