8 Provisions From The SECURE Act of 2019

The View From The Pinnacle

Maybe you’ve heard of it, but do you know how the SECURE Act could impact your retirement plans? Or what about the retirement options offered by your employer? Here are eight of the 29 provisions in the act to keep an eye on.

Click the timestamps below to fast forward to certain points of the episode.

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[1:27] SECURE Act

  • This stands for Securing Every Community Up for Retirement Enhancement Act.
  • This is the first major retirement legislation since 2006. There are 29 changes, but we will talk about eight of the bigger ones.

[2:05] 1 – Increase small employer access to retirement plans

  • 90% of businesses have 20 or less employees and thus the majority of employees in the US are employed by small businesses.
  • In the past you could use SEP IRAs, but the SECURE Act will create even more opportunities for employers to supply retirement benefits to employees.

[3:24] 2 – Increase annuity options inside retirement plans

  • Open market 401(k)s have not had annuity options as readily accessible in the past. This can be a good or bad change, depending on if the strategies are used properly.

[4:11] 3 – Increase RMD age

  • Sean shares a client example of someone wondering what to do when they reach the age of required minimum distributions.
  • The new rule would increase the RMD age from 70.5 to 72. This could open up a larger window of opportunity for people to create a solid financial plan and gives folks more avenues for various investment strategies.

[5:55] 4 – Removal of age limitation on IRA contributions

  • You have been able to contribute to a Roth IRA (as long as you were working) without any age restrictions. But this hasn’t been the case with traditional IRAs. Under the new rule, age restrictions would be lifted to more closely reflect the Roth rules.

[6:31] 5 – Tax credits for automatic enrollment

  • This will encourage employers to build automatic enrollment into their retirement plans.
  • Automatic enrollment will also offset some of the costs through the tax credit.

[7:39] 6 – Penalty-free distributions for the birth or adoption of a child

  • Under the Act, you could take out $5,000 from your retirement following the birth or adoption of a child.
  • This allows you to avoid the 10% penalty, but you still pay the taxes.
  • The distribution needs to happen within one year of the child being born or adopted.

[8:40] 7 – Lifetime income disclosure for defined contribution plans

  • A 401(k) plan is an example of a defined contribution plan. This rule would require employers to send a notice every year showing the expected growth of your money and your estimated monthly income in retirement.

[9:31] 8 – Removal of the stretch IRA provisions

  • The stretch IRA is one of the most widely used planning tools when it comes to transitioning assets to the next generation, so this could be a big deal.
  • This is viewed as a tax-generating provision, requiring most beneficiaries to distribute the account over a ten-year period.

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