The SECURE Act Passed. Now What?

Updated 2.2.2023: In 2023, the required minimum distribution (RMD) age raised to 73.

In late December of 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law to give Americans greater security and comfort for life after work. Additionally, the SECURE Act will help those in financial need during some of life’s greatest milestones.¹

Some of the major provisions included in this bill will affect: those in or near retirement, new parents, employers and employees, and even individuals with student loans and/or estates. The intent of the bill is to increase accessibility to retirement savings accounts to help alleviate money burdens.

Here are 7 key takeaways of the SECURE Act:

1. Increased required minimum distribution (RMD) age. Individuals must now begin taking RMDs from their retirement accounts at age 72, which increased from age 70 ½ . It’s important to note this new change only applies to individuals who turn 70 ½ after December 31, 2019. This means any individual who turned 70 ½ in 2019 must take an RMD in 2019, 2020, and beyond.¹
2. Repeal of the maximum age for traditional IRA contributions. Individuals may now contribute to a traditional IRA at any age if they have earned income. Before this act was signed, the law stated individuals were prohibited from contributing after age 70 ½.²
3. Inherited distributions must be taken within 10 years. Prior to the new law, beneficiaries of an inherited IRA or 401(k) could “stretch” their distributions and tax payments over the course of their lifetime. Under the new law, beneficiaries are required to withdraw assets from an inherited IRA or 401(k) plan within 10 years of the accountholder’s death. There are exceptions for: surviving spouses, minors, disabled individuals, and those who are less than 10 years younger than the original IRA owner or 401(k) participant.³
4. Penalty-free withdrawals may be taken upon the birth or adoption of your child. An individual may now take a “qualified birth or adoption distribution” up to $5,000 per parent from an applicable defined contribution plan penalty-free to help offset the costs of having or adopting a child.²
5. 529 accounts may be used to pay down qualified student loan debt repayments. If funds are left over in a student’s 529 college savings plan upon graduation, the plan may be used to help repay up to $10,000 in student loan debt over the course of the student’s life.¹
6. Part-time workers are eligible to participate in 401(k) plans. The new law requires employers with a 401(k) plan to offer part-time employees access to the company’s 401(k) plan. This applies to anyone who has worked more than 1,000 hours in one year, or 500+ hours in three consecutive years.³
7. Provisions to help small businesses create a retirement plan. Several provisions were worked into the bill to make it easier for small business owners to offer 401(k) plans to their employees via Multiple Employer Plans (MEPs). MEPs essentially allow unrelated small businesses to come together to offer a retirement plan to their employees, making it easier and less expensive to administer.¹

As stated in the title of the bill, the goal of the SECURE Act is to give Americans greater security in retirement and in life. To understand how the provisions will affect your future goals and aspirations, discuss it with a CFS financial advisor.*

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