The New Rules in The SECURE Act that May Affect You


Passed by Congress last spring, The SECURE Act (an acronym for the “Setting Every Community Up for Retirement Enhancement”) was finally signed into law as part of the massive spending bill approved at year end. The entire bill is nearly 1,200 pages long, but the Act regarding to changes in rules for your retirement savings is examined below.

Key Takeaways

  • Change to Required Minimum Distribution (RMD) age
    The new law raises the age at which individuals must begin taking RMDs from their retirement accounts from 70½ to 72. 
    Please Note: The new law only applies to people who turned 70½ after December 31, 2019. If an individual turned 70½ in 2019, the law does not apply—that person must take an RMD in 2019, 2020, and beyond.
  • Contributions to traditional IRAs after age 70½
    The updated law now allows for contributions to an individual retirement account (IRA) after 70½. Individuals may continue contributing to an IRA at any age, with the caveat that they have earned income in the year of the contribution.
  • Rules for inherited retirement accounts (“Stretch IRAs”) Previously, inherited retirement accounts were able to distribute those assets over the beneficiary’s lifetime. Under the new rules, those assets must be distributed within 10 years. This has potentially significant implications for estate planning. Exceptions are in place for spouses, minor children, disabled individuals and people less than 10 years younger than the decedent. The bill only applies to accounts that are inherited in 2020 and beyond, and does not affect existing inherited accounts.
  • Withdrawals for birth/adoption expenses penalty-free
    Through the first year after the birth or adoptionNew parents can withdraw up to $5,000 from an IRA or an employer-sponsored retirement plan to pay for birth and/or adoption expenses, . Taxes still need to be paid on pre-tax contributions, but no penalties apply to the withdrawal.
  • Participation in a 401(k) plan for part-time workers
    This new rule allows for part-time employees to participate in a company’s 401(K) plan. They become eligible once they have worked for the company at least 500 hours a year for three consecutive years .
  • Retirement plan projected income disclosure
    The law requires the Department of Labor to propose rules for a new disclosure to retirement plan participants that will show the participant’s projected monthly income in retirement based on current retirement assets. It’s designed as a kind a “progress report” to show employees how they are doing on saving. The rule-making process for this is likely to take more than a year, followed by an implementation period, so it is unlikely we will see this standard in place in 2020 before this becomes standard.
  • Easier access for annuities to be offered in 401(k) plans
    Though plans are not required to do so, the new law lowers restrictions on offering annuities in employer-sponsored plans.
  • 529 plan rule changes can help repay student loans
    The law allows for more flexibility when in comes to assets in these college-savings plans, now allowing for them to be used to repay up to $10,000 in qualifying student loans.
  • Provisions to help small businesses
    Several provisions in the bill are designed to make it easier for small businesses to offer retirement plans to their employees, including one that will allow unrelated small businesses to group themselves in “multiple employers plans” to offer a plan to employees.

Statistics show that most individuals don’t—or can’t—save enough for retirement early on to live comfortable in their golden years. And it’s hard to say if these changes will help the average taxpayer reach their retirement goals with a greater degree of ease. But it’s a start.