What Is The Secure Act, Impacting Your Retirement Future
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The Secure Act, The Setting Every Community Up for Retirement Enhancement, has enjoyed bipartisan support during these past three years, despite being stalled for years. Backers of this legislation recently added it to the spending bill in hope to gain passage by the end of 2019. The director of economic policy at the Bipartisan Policy Center, Shai Akabas, said, “It is always good to be attached to the last train leaving the station in Washington, which is what this budget bill is. It has to be passed by Friday, when there will be a government shutdown. Even amid impeachment debates, this will be an extremely huge priority for Congress.”
On Thursday, December 19, 2019, Congress has passed the Secure Act, designed to help Americans to save more, bringing about the most significant changes to the nation’s retirement system in more than a decade. President Trump is expected to sign the Secure Act. As the U.S. population age and employers shifting responsibility for retirement saving to individuals, there is growing concern that a significant portion of Americans are at risk of outliving their money. According to the nonprofit Employee Benefit Research Institute, 41% of American households are projected to run short of money in later life.
An important provision of this legislation encourages 401 (k) plans to replicate a feature of old-fashioned pensions by offering products with guaranteed income payments. This legislation also tries to expand retirement plan coverage by making it easier for small companies to join together to offer 401 (k) plans and share administrative costs. About 30% of private-sector employees work for employers who do not currently offer a way to save for the future. To help participants to make savings last, this legislation makes it easier for employers to offer annuities (with guaranteed fixed monthly income, potentially for as long as the retiree lives), in 401 (k)-type retirement plans. It also protects employers following certain procedures from being sued if they select an insurance company to make annuity payments such that insurer later fails to pay claims.
A provision in this legislation requires many people who inherit tax-advantaged retirement accounts after Dec. 31 to drain the accounts within a decade and pay any taxes due. At the moment, many beneficiaries can liquidate those accounts, known as Stretch IRAs, over their own lifetimes. According to the Joint Committee on Taxation, various provisions of the legislation are estimated to reduce federal revenue by $16 billion over a decade, largely offset by changes related to inherited retirement accounts.
This legislation also paves the way for Americans to stay on their jobs into their 70s and beyond to continue saving in individual retirement accounts. Starting Jan. 1, it removes the age cap for contributing to traditional IRAs, currently 70 1/2, for individuals with wage income, and allows people with tax-deferred accounts to delay until after turning 72 (the minimum withdrawals the law currently requires starting after turning 70 1/2). The change will apply to people who turn 70 1/2 after Dec. 31, 2019.
This legislation allows employers that automatically enroll workers in certain 401 (k) plans to automatically raise employees’ savings rates to 15% of annual earnings over time (up from 10% cap now), to encourage workers to save more.
There are also features of this legislation with provision requiring employers to allow certain part-time workers to participate in 401 (k) plans.
Senator Ron Wyden of Oregon said, “With Americans delaying retirement and increasingly working part time, these changes will allow workers to continue to save. While we must do more to ensure financial security for older Americans, passage of this bill is an important step.”
For those with 529 education savings accounts, this legislation will allow tax-free withdrawals of as much as $10,000 for repayments of some student loans. Parents can also take penalty-free distributions from retirement accounts of as much as $5,000 within a year of the birth or adoption of a child.
The videos of these financial advisers provide different view points of the SECURE ACT. They do not necessarily represent the view points of Windermere Sun.
Congress has officially passed the SECURE Act as part of a larger spending bill. If it’s signed into law, there are provisions that will impact key retirement planning strategies like when you take Required Minimum Distributions and how you invest in your 401(k), Damon King with ChappelWood Financial Services shares what it may mean, in the video “How Will the SECURE Act Affect Your Retirement?“, below:
In this video, we recap a couple of key details of the Secure Act of 2019 and how they may impact your retirement plans, in the video “How the Secure Act of 2019 Could Impact Your Retirement“, below:
The “Secure Act” will definitely effect retirement planning for a lot of people. Davis Garrison the Third of Preservation Financial Group joins us on Daytime to share with us more about the “secure act” and its effects, in the video “What is the “Secure Act”“, below:
In this video CPA/Attorney James Lange reacts and offers insight in 13 minutes on the SECURE Act that the House voted a staggering 417-3 that will effectively kill the Stretch IRA as we know it, in the video “SECURE Act Explained in 13 Minutes: Learn How and Why Your IRAs and Retirement Plans are at Risk!“
Congress Set To Pass SECURE Act At Last Minute, Impacting Retirement Planning And Increasing Taxes. Money Not Math 33, in the video “Congress Set To Pass SECURE Act At Last Minute, Impacting Retirement Planning And Increasing Taxes“, below:
Gathered, written, and posted by Windermere Sun-Susan Sun Nunamaker More about the community at www.WindermereSun.com
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