The SECURE Act was passed as part of the spending bill in late 2019 and there are nearly 30 new provisions or major changes that will impact nearly everyone – recent retirees, employers, advisors, full-time employees and part-time employees. Get a plan: annexwealth.com/get-started…(read more)

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The SECURE Act, also known as the Setting Every Community Up for Retirement Enhancement Act, was signed into law in December 2019 and aims to make significant changes to retirement plans for individuals across the United States. This article will provide an overview of the SECURE Act and highlight how it may affect you and your retirement savings.

One of the key features of the SECURE Act is an increase in the required minimum distribution (RMD) age. Previously, individuals were required to begin taking withdrawals from their retirement accounts, such as a traditional IRA or 401(k), at the age of 70 ½. The SECURE Act has raised this age to 72, allowing individuals to continue growing their retirement savings for an additional year and a half.

Moreover, the SECURE Act eliminates the age limit for contributing to traditional IRAs. Under the previous rules, individuals were prohibited from contributing to their traditional IRA once they reached the age of 70 ½, regardless of whether they were still employed or not. With the SECURE Act, individuals can now continue making contributions as long as they are still earning income.

Another significant change brought about by the SECURE Act is related to inherited retirement accounts. Prior to the legislation, beneficiaries of retirement accounts had the option to “stretch” their inherited accounts over their lifetime, allowing for more tax-efficient withdrawals. However, the SECURE Act has eliminated this option for most non-spouse beneficiaries. Instead, beneficiaries will now be required to withdraw the entire inherited account balance within ten years. This change may result in higher tax burdens for beneficiaries and necessitate a more thoughtful approach to estate planning.

Additionally, the SECURE Act includes provisions aimed at promoting retirement savings for employees of small businesses. Employers will now have access to new retirement options, such as multiple employer plans (MEPs), which allow small businesses to join forces in offering a shared retirement plan. This provision will potentially benefit both the employers and employees, as it will reduce administrative costs and expand retirement savings opportunities.

Furthermore, the SECURE Act addresses the importance of lifetime income options within retirement plans. It requires that employers provide participants with an annual statement showing the estimated monthly income their retirement account balance could generate. This change aims to increase awareness and promote better planning for retirement income.

It is important to note that while the SECURE Act brings about several changes to retirement planning, it may not directly impact everyone in the same way. Its effects will largely depend on individual circumstances and factors such as age, employment status, and estate planning goals. Consequently, it is advisable to consult with a financial advisor or tax professional to fully understand how the SECURE Act will impact your personal retirement plan.

In conclusion, the SECURE Act introduces significant changes to retirement planning in the United States. By increasing the required minimum distribution age, eliminating age limits for contributions, modifying rules for inherited retirement accounts, and promoting retirement savings for small businesses, the SECURE Act aims to enhance retirement readiness and financial security for individuals. However, it is crucial to understand how these changes will affect you personally, and seeking professional guidance is recommended to make the most informed decisions regarding your retirement savings.