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Retirement Plans might become more SECURE

Last week, The House of Representatives almost unanimously passed a new bill called The Setting Every Community Up for Retirement Enhancement (SECURE) Act.  If it is signed into law, the Secure Act will be the most significant change to the retirement system since the Pension Protection Act of 2006.

Why was the SECURE Act created?

A March 2019 Bankrate survey found that more than one in five working Americans aren’t saving for financial milestones such as retirement.   Another Bankrate survey conducted in May 2019 found that one of the biggest regrets Americans have is not saving for retirement.  The Federal Reserve conducted a recent survey as well and the results showed that 25% of working adults have no savings or pensions at all.

One of the contributing factors to these statistics is that the opportunity to invest in retirement accounts is not available to all workers.  According to the Bureau of Labor and Statistics, only fifty-eight percent of workers in private sector jobs have access to a retirement savings plan.  In addition, only 35 percent of people who work less than 35 hours each week have access to a 401(k) or pension plan at work.  Still another statistic shows that only 46 percent of workers at companies with 100 employees or less had access to a 401(k) plan.

By lifting the age limit on investing in individual retirement accounts, providing more avenues for small businesses to offer retirement plans to their employees, and allowing part-time workers access to 401(k) accounts, the SECURE Act hopes it can help more workers save more for retirement.

What is in the Bill?

Here are some of the main provisions included in the SECURE Act:

  1. Repeal the maximum age for traditional IRA contributions, which is currently 70½
  2. Increase the required minimum distribution age for retirement accounts to 72 (up from 70½)
  3. Allow long-term part-time workers to participate in 401(k) plans
  4. Allow more annuities to be offered in 401(k) plans
  5. Parents can withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption for qualified expenses
  6. Parents can withdraw up to $10,000 from 529 plans to repay student loans
  7. Increase Small Employer Access to Retirement Plans
  8. Tax Credit for Automatic Enrollment
  9. Removal of “Stretch” Inherited IRA Provisions

How does it Impact You?

In a recent CNBC Make It interview, Chad Parks, founder and CEO of Ubiquity Retirement + Savings says, “This is a stepping stone to try to solve that looming retirement crisis.”  Parks also says that by making it easier and cheaper for small businesses to offer 401(k) plans, if the bill becomes law, “millions more people, hypothetically, should have access to the ability to save at work.” Part-time employees stand to benefit greatly if the Secure Act passes. “Any employee who has worked for you for at least three years and at least 500 hours a year is now able to participate in your retirement plan,” says Parks.

What’s Next?

The bill is being sent to the Senate for debate and approval.   Lawmakers could vote for it or against it, remove provisions, or make changes to some of its provisions.  The Senate also has its own version of SECURE that is being developed within its own finance committee: The Retirement Enhancement and Savings Act (RESA) but the two Bills are very similar.  If the Senate approves SECURE Act, it will then go to the President's desk for final approval and signature.   Whether or not this can happen in 2019 or at all, remains to be seen.  

This can be a lot of information to take in and can get confusing at times. Don't worry, I'm here to help! If you have any questions at all, please feel free to email me or give me a call. 

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning.  Please consult your financial, legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.