The SECURE Act: What You Need to Know

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted as part of a year-end budget appropriations bill that passed the U.S. Senate on December 19, 2019. It was subsequently signed by President Trump. Among its key provisions that affect retirement planning are the following:

§  Change in RMD Rules- The start date for required minimum distributions (RMDs) was pushed back from age 70.5 to 72 for those who turn age 70.5 in 2020 or later. Thus, those with tax-deferred retirement savings accounts can let them grow another 1.5 years before having to tap their savings.

§  Change in IRA Rules- Traditional individual retirement account (IRA) contributions are no longer prohibited at age 70.5 and beyond. This, of course, assumes that the person saving money in an IRA has earned income from a job or self-employment. This change is welcome news for older workers who are planning to work into their 70s or beyond and need to save more money.

§  Replacement of “Stretch” Provisions- A new 10-year rule for non-spouse beneficiaries of IRAs and defined contribution plans will replace previous rules that allowed them to stretch distributions over their life expectancy. The entire account balance must now be distributed by the 10^th year following an inheritance.

§  New Rules for Small Businesses- Provisions to encourage the use of retirement plans by small businesses were enacted. For example, there are tax credits available for retirement savings plan start-up costs. The SECURE Act also makes it easier for part-time employees to qualify to make savings plan deposits.

For a comprehensive summary and analysis of the SECURE Act, review this Nerd’s Eye View blog post by nationally known financial planning industry thought leader Michael Kitces.