The Setting Every Community Up for Retirement Enhancement (SECURE) Act is a landmark piece of legislation that was signed into law in December 2019. Its main objective is to help Americans save more money for retirement and to make it easier for small businesses to offer retirement plans to their employees. In this article, we'll take a closer look at the SECURE Act and how it benefits investors.
- Required Minimum Distributions (RMDs) age increased
One of the key changes brought about by the SECURE Act is the increase in the age at which individuals are required to take distributions from their retirement accounts. Previously, the age was 70 ½, but it has now been raised to 72. This change is a huge benefit for investors because it allows them to keep more money in their retirement accounts for longer, allowing it to continue growing tax-free.
- The ability to continue making IRA contributions after age 70 ½
Another benefit of the SECURE Act is that it allows investors to continue making contributions to their traditional IRAs even after they reach age 70 ½. This change is significant because it allows investors to keep saving for retirement even if they have already reached the age when they are required to take distributions.
- Elimination of Stretch IRA provisions
Under the previous rules, beneficiaries of inherited IRAs were allowed to stretch out the required minimum distributions over their lifetimes. However, the SECURE Act has eliminated this provision for most beneficiaries, requiring them to withdraw the entire balance of the inherited IRA within ten years. While this may sound like a negative change, it actually benefits investors by forcing them to take distributions sooner and potentially avoid higher taxes later on.
- Greater access to retirement plans for part-time and long-term employees
The SECURE Act also makes it easier for part-time and long-term employees to participate in employer-sponsored retirement plans. Under the new rules, employees who have worked for at least 500 hours per year for three consecutive years are eligible to participate in their employer's 401(k) plan. This change benefits investors by giving them access to retirement savings options that they may not have had previously.
- Annuities inside retirement plans
The SECURE Act also makes it easier for employers to offer annuities as an investment option within their retirement plans. This change benefits investors by giving them access to a wider range of investment options that can provide guaranteed income in retirement.
In conclusion, the SECURE Act is a game-changer for investors, making it easier for them to save more money for retirement and access a wider range of investment options. With its increased RMD age, ability to continue making IRA contributions, elimination of stretch IRA provisions, greater access to retirement plans, and the inclusion of annuities, the SECURE Act offers significant benefits to investors.