The SECURE Act - What It Might Mean for You, Your Retirement and Your Heirs

Contrary to the name, the SECURE act is not related to recent news regarding our borders or immigration. Rather, it is pertinent to something much closer to home – your Financial Freedom years!

While currently still in committee, based on bipartisan support and passage by a 417-3 vote in the House, it appears very likely that the proposed legislation will become law.

Without getting mired in the details, here are a few major (potential/likely) changes:

Required Minimum Distributions (RMDs) – The SECURE act would push back the date for Required Minimum Distributions from 70.5 to 72. Why? The half year is cumbersome in practice and people are living longer. The Senate is proposing 75!

Impact: your tax-deferred savings can continue to grow even longer before you are forced to begin mandatory withdrawals.

“Stretch” Inherited IRA/401(k) – Instead of your heirs being allowed to stretch their inherited retirement distributions over their lifetime, they may be forced to distribute the account over only 5 or 10 years.

Impact: this could create a significant, and unintended, tax burden for your beneficiaries as any traditional or tax-deferred distributions would be considered taxable income for them (and hence create more federal tax revenue sooner).

Improved 401(k) access for those in smaller companies. Setting up an affordable retirement plan is tough for small employers, and the SECURE Act seeks to allow them to band together to offer larger plans with less liability and cost. In addition, part-time employees would now have access as well.

Impact: This is a significant potential win for small employers and the employees as a way to improve access to retirement plan options. 

529 Flexibility– this would allow students to use funds in 529’s for apprenticeships, homeschooling, and even towards student loan repayments.

On the whole, most of these changes should encourage increased retirement saving for more workers.

Keep in mind the Senate will likely add in their own provisions and none of the above is final yet. We will certainly stay abreast of this legislation and incorporate key provisions as appropriate into your plan. If you have questions as to how these changes might affect you, please do not hesitate to reach out.