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Overview of the SECURE ACT and How it Affects Retirement Accounts

You probably do not pay close attention to every piece of legislation passed by Congress, but one recently enacted law should be of particular interest for its impact on your retirement. The Setting Every Community Up for Retirement Enhancement Act of 2019, i.e., the SECURE Act, was signed by President Trump in December 2019 and became effective on January 1, 2020. Part of a federal government spending bill, the measure also includes provisions aimed at helping Americans enhance their financial security in retirement.

Because of the implications for your future, it is wise to consult with a retirement and estate planning attorney to understand how the law applies to your specific situation. An overview of the SECURE Act major provisions may also be helpful.

Expansion of Annuity Options in 401(k) Accounts

The SECURE Act gives more employers the green light to offer annuities for investment within employee 401(k) plans. Prior to the effective date of the legislation, employers had a fiduciary duty to review options and make sure they were suitable for employees. Now, the burden is on the insurance company that sells the annuity.

  • Pro: Annuities enable a guaranteed income after retirement, so retirees will experience increased financial security in the long term;
  • Con: Making the wrong choice with an annuity can have considerable adverse consequences. It is crucial for employees to work with a knowledgeable lawyer before moving forward.

Increased Age Limits for Distributions and Contributions

Those with a 401(k), IRA, or other qualifying plans are required to take minimum distributions once they reach a certain age. The SECURE Act increases the threshold from 70.5 to 72 years old. In addition, the statute eliminates the maximum age that individuals can contribute to IRAs. The change reflects the fact that many Americans are working later in life.

Withdrawals on Certain IRAs

The SECURE Act mandates that non-spousal beneficiaries who inherit IRAs accounts must withdraw all funds within 10 years after the owner’s death. There is no requirement that they need to take distributions on a regular or annual basis, but the account must be emptied after the tenth year. Before passage of the law, these individuals were able to take distributions for the rest of their lives – an arrangement termed a “stretch” IRA.

Tax Credit for Auto-Enrollment

To further encourage retirement investment, the recent bill allows an employer to take advantage of a tax credit if it automatically enrolls employees into retirement plans. The credit is intended to defray the costs for employers to handle auto-enrollment.

Contact Nawrocki Center for Elder Law to Learn More

While this overview of the SECURE Act may be useful as a summary, it is important to work with an experienced lawyer to ensure you take the best advantage of the rules. At Nawrocki Center for Elder Law, our attorneys have decades of combined experience advising clients in the areas of retirement and estate planning, especially when new laws impact their future. For additional information and legal assistance, please contact our office to speak with a member of our team. You can reach our office by calling 810-893-5277 or visiting our website.


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