The Secure Act and what it could mean for you

JULIE HALL, CFP®, MSF Director of Financial Planning

You may have heard some recent buzz on a new retirement bill. On May 23, 2019, The House of Representatives passed The Secure Act, which stands for “Setting Every Community Up for Retirement Enhancement”. Assuming the bill gets through the Senate and is signed into law by the President, as is currently expected, it should provide some needed improvement for our nation’s retirement system. According to the Census Bureau, in 2035, older adults are projected to outnumber children for the first time in U.S. history! Not only do we have an aging population, we also have an aging population that is living longer, and on average not saving enough.

The following summarizes some of the key provisions in the bill:

Key provisions that might impact you

Potential benefits

  • Repeal the maximum age for traditional IRA contributions, which is currently age 70 1/2
  • Increase the required minimum distribution age for retirement accounts to age 72 (up from 70 1/2)
  • Allow long-term, part-time workers to participate in 401(k) plans
  • Allow more annuities to be offered in 401(k) plans
  • Permits parents to withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption for qualified expenses
  • Permits parents to withdraw up to $10,000 from 529 plans to repay student loans

Potential drawbacks

  • Reduction to the “stretch IRA” limits that would require non-spouse beneficiaries to liquidate inherited retirement accounts faster
  • Increased penalty for failure to file your tax return

It is important to stress that the Secure Act is not law yet. As this bill progresses, we will update you. If you would like to discuss the potential changes with your advisor, do not hesitate to contact us.