Retirement Tweaks

Worried you don’t have enough saved for retirement? The US Congress is, and that is why they passed legislation to encourage retirement savings.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, was signed into law by President Trump on December 20, 2019.

The new law makes some tweaks to retirement, rather than major shifts.

Author Debra Brede writing in Forbes explains, “the idea is that the act will help more people save for retirement in tax-advantaged accounts, like 401(k)s, and make their assets last, so that they don’t end up outliving their money.”

According to CNBC’s John Schoen changes include: “making it easier for small businesses to band together to offer 401(k) plans, requiring businesses to let long-term, part-time workers become eligible for retirement benefits and repealing the maximum age for making contributions to traditional individual retirement accounts (right now, that’s 70½)”.

These changes will help small businesses offer retirement plans, provide equity to women who disproportionately tend to carry the burden of child and elder care and may not be able to participate in 401(k) plan if they work part-time, and to allow changes that fit our growing life expectancy.

Other changes include:
• An increase to how much employees can have as an automatic deduction from their paychecks for their retirement, from 10% to 15%, leading to people saving more.
• A new requirement that employers would need to disclose the amount of sustainable monthly income their 401(k) balance could support. The idea is that participants would understand the level of spending their 401(k) balance could support – allowing them to better plan for retirement.
• The law accelerates the rate at which heirs of IRAs or 401(k)s must take distributions from their accounts (and pay taxes on). Prior to this law, people were able to stretch their distributions based on their expected life expectancy. Except for a few limited cases, the new law puts a maximum of 10 years to deplete the IRA account.
• Allowing annuities to be added as an investment option.