For many Americans, financial insecurity is a real threat, and much of it is due to rising health care costs, limited Social Security funds, and debt. According to a 2017 report by the U.S. Government Accountability Office, about half of the household age of 55 and older have no retirement savings and up to two-thirds of workers may not have enough savings to maintain their standard of living in retirement.
In May the U.S. House of Representatives passed the SECURE Act, a bill backed by both parties that intends to improve the nation’s retirement system. If it passes the Senate, which is currently pending, it will be sent to the President to sign into law. The SECURE act would be the first major retirement legislation since the Pension Protection Act in 2006.
Let’s look at some of the major changes the SECURE Act is addressing and what the bill could mean for you:
Repeal the Maximum Age Limitation for Traditional IRA Contributions
As the law stands, today maximum Traditional IRA Contributions are allowed until age 70 ½. As American’s life expectancies increase and workers continue to stay in the workforce, the SECURE Act would remove this savings age limitation for traditional IRA contributions.
Increase the Required Minimum Distribution (RMDs) Age
Under current law, the required minimum distributions (RMDs) from retirement accounts must begin at age 70 ½. The SECURE act seeks to increase the required minimum distribution age to age 75, addressing today’s increase in life expectancy.
Expand small employers’ capability to access retirement plans
The goal is to offer some form of retirement savings to employees of small businesses. The SECURE ACT would make a variety of changes to retirement rule. By creating incentives and providing lower-cost solutions for small employers helping them address the needs of their staff.
Penalty-free Withdrawals from Retirement Plans
In the case of “qualified birth or adoption,” the legislation provides penalty-free withdrawals from retirement plans to the parents. The distribution would need to occur within one year of the adoption or birth.
Expansion of Section 529 Plans
Parents can withdraw up to $10,00 from 529 to repay qualified student loans, or cover costs associated with registered apprenticeships, homeschooling, private elementary, secondary or religious schools.
The SECURE Act is currently pending in the Senate and will likely see modifications before signed into a bill. The SECURE Act makes positive changes and takes a step toward addressing the future retirement crisis for many Americans. Let’s hope this is the first of many attempts to help all Americans retire with savings.