What is it?

You may have heard through the grapevine about a new law that’s changing the way Americans save for retirement. The SECURE Act, Setting Every Community Up for Retirement Enhancement Act of 2019, was originally passed by the House in July, but wasn’t approved by the Senate until Dec. 19 as part of the end-of-year appropriations negotiations. President Trump signed it into law the next day.

The new law was created to expand individual retirement savings opportunities, impacting current retirement and tax-related rules, in order to strengthen the financial well-being of Americans’ retirement accounts throughout the country.

When does it go into effect?

Right now. The SECURE Act has been law since it was signed by the president on Dec. 20. Many provisions in the law became effective on Jan. 1, 2020.

Who’s affected by it?

Students, new parents, members of the military, part-time workers and more. Many Americans will now be able to bypass certain retirement savings hurdles they may have previously faced. An estimated 1 in 3 people using traditional IRA savings plans will also be affected by this new law.

Why was this law passed in the first place?

A savings crisis is stirring in America. According to Bankrate, more than 1 in 5 Americans aren’t saving any money for retirement, emergencies or other financial goals.

People have many reasons why they don’t save. Expenses, debt, lack of wage growth, lack of access to workplace accounts. The list goes on and on.

Instead of having to rely solely on Social Security later in life, the SECURE Act aims to reduce barriers to saving for retirement.

How could it affect me?

Retirees

• Previously, you couldn’t contribute to your traditional IRA after you turned 70½ years old. With the SECURE Act, as long as you have earned income, you won’t have any limit to how long you contribute, although you’re required to begin taking required minimum distributions (RMDs) at age 72.
• Prior to the SECURE Act, account owners were required to begin receiving required minimum distributions beginning at age 70½. The SECURE Act increases this age to 72 years.

New Parents

• The SECURE Act will allow you to withdraw up to $5,000 from a retirement account to support the cost of having a baby or adopting a child without having to pay a 10% early withdrawal fee. You’ll owe taxes on the amount you take out. If you and your spouse have eligible retirement plans, you may receive up to $5,000 each to support such a cause.

Students

• Graduate and postdoctoral study students can start saving for retirement earlier than before. Under the SECURE Act, stipends and non-tuition fellowship payments that you receive are now treated as compensation when it comes to making IRA contributions.
• With the SECURE Act, you can now use funds that remain after paying for college expenses from a 529 plan to cover up to $10,000 of student loans.

Part-Time Employees

• The SECURE Act has new rules for employers, requiring them to include long-term, part-time workers in their 401(k) plans. Check with your employer to see if you qualify.