Retirement New Secure Act Makes Retirement Saving Easier Written by: Scott Page
new retirement savings rules

Three years in the making and designed to raise the level and security of retirement saving, the SECURE Act includes reforms that could make saving for retirement easier and more accessible for many Americans.

Here are several points to seek financial advisement regarding:

  • If you are turning 70½ in 2020 and had planned on taking a required minimum distribution (RMD), work with a financial advisor to reconsider your withdrawal plans. RMDs now begin at age 72.
  • Have you determined your retirement readiness? Consider how long you plan to work, and when you expect to start withdrawing from your retirement savings. You can make IRA contributions beyond age 70½. The change begins for tax year 2020 contributions, and you can make a contribution up until April 15, 2021.
  • If you are a part-time worker and have not been eligible to participate in a 401(k), ask your employer how and when you can enroll. Long-term, part-time workers now are eligible to join their company’s 401(k) plan. There is an exception: collectively bargained plans. Otherwise, employers maintaining a 401(k) plan are required to offer one to any employee who worked more than 1,000 hours in one year, or 500 hours over 3 consecutive years.
  • Consult with your tax advisor if you have an IRA that you planned to leave to beneficiaries based on prior rules. (If you’re a beneficiary of an inherited IRA or 401(k) and the original owner passed away prior to Jan. 1, 2020, you don’t need to make any changes.) Inherited IRA distributions generally must now be taken within 10 years.
  • Small-business owners can take advantage of a new tax credit – up to $5,000 ­– to establish a retirement plan. If the retirement plan includes automatic enrollment, an additional credit of up to $500 is available. This credit applies to small employers with up to 100 employees over a 3-year period beginning after Dec. 31, 2019 and applies to SEP, SIMPLE, 401(k), and profit-sharing plans.
  • Also, small-business owners should consider joining a multiple employer plan. This option will be available in 2021. The SECURE Act allows multiple employer plans (MEPs) by allowing completely unrelated employers to participate in an MEP and eliminates the stipulation that all employers participating in an MEP may face adverse tax consequences if one employer fails to satisfy the tax qualification rules.
  • Remember that 529 for Junior’s college expenses? If the plan has money left, consider using the remaining money to help pay off student loans. You can use a 529 savings account to pay up to $10,000 in student debt over the course of the student’s lifetime. (A 529 plan may also now be used to pay for certain apprenticeship programs.)

As plans evolve, so should you. Talk with your financial advisor to ensure your retirement and estate planning goals are being addressed. Financial circumstances and changes in the tax code are common and you should update your strategies accordingly.