How the SECURE Act Affects You

On average, retirees are predicted to live ten years longer than their parents, which means retirees should be planning a retirement that could span 20 to 30 years or more. While living longer means more time to pursue passions or spend time with your loved ones, it also means preparing for retirement with strategies that are designed for long-term longevity. Fortunately, Congress is keeping up with these issues with proposed legislation that would make it easier to prepare for a long retirement and remove limitations that originated from shorter life expectancies.

The “Setting Every Community up for Retirement Enhancement,” or SECURE Act, was sent to the full House of Representatives for consideration on Tuesday, which was met with acclaim from some industry experts, calling it the most significant potential changes to the U.S. retirement system in the last decade

“Unfortunately, Americans currently face a retirement income crisis, with too many people in danger of not having enough in retirement to maintain their standard of living and avoid sliding into poverty. Social Security benefits are modest, employer-sponsored pensions are disappearing, and too many Americans find it difficult to save for retirement,” explained Congressman Richard Neal, Chairman of the House Ways & Means Committee, highlighting the pressing need for this reform.

The SECURE Act contains many popular proposals designed to help Americans prepare for retirement. We’ve picked out a few of the most impactful changes and elaborated on how they could impact your retirement.

1. Required minimum distributions from your retirement accounts proposed to kick-in at age 72 instead of 70 1/2.


How it would impact you: This change could give you up to two extra years to allow your money to grow tax deferred in qualified accounts such as IRAs and 401(k) plans. That means more time to work if you want to, or just let your money stay invested in qualified accounts until you are ready to begin taking distributions.


2. Draft legislation would allow contributions to traditional IRAs beyond age 70 ½


How it would impact you: Many people are working beyond age 70, either by choice or out of necessity. With the restriction on contributions to traditional IRAs lifted, people working into their 70s would have the opportunity to continue taking advantage of the benefits of saving in tax-deferred accounts until they are ready to retire or even in retirement. That’s more time to build the nest egg to support an increasingly longer life in retirement.


3. Employers with a 401(k) plan would be required to allow long-term part-time employees to contribute


How it would impact you: It is common for retirement to be a slow transition rather than a switch you flip, with many people moving from full-time work to part-time work before fully retiring. This change would give those transitioning to retirement with part-time work, and those who’ve always had part-time work, greater access to 401(k) plans to bolster their retirement nest egg. This is especially important for women, who are more likely to work part-time


4. Small employers would have greater ability to band together to offer retirement plans, which could amount to 700,00 new retirement accounts.


How it would impact you: If you work at a small business and previously haven’t had access to retirement plans like a 401(k), this change may allow you to participate in the benefits of saving in this type of tax-deferred fund.


Okay, so what’s next for this legislation?

This legislation was introduced by a bipartisan group and was sent to the full House with unanimous support. Similar legislation has been introduced, also with bipartisan support, in the Senate. Many are viewing the similarity between the House and Senate proposals and their bipartisan support as a positive sign that Congress may enact meaningful retirement reforms in this session.


At Retirement Power Hours, we are incredibly encouraged by this news and support Congress’ efforts to work together and advance critical reform to help all Americans take on the challenges of modern retirement and help people prepare for a long retirement with the savings they need.