The steady stream of impeachment related news has made it difficult to hear about anything else is going on in D.C. these days. Something you may have missed is the passing of the Secure Act, a new bill which aims to get more Americans saving for retirement and increasing the amount they are able to save.
The Secure Act stands for Setting Every Community Up for Retirement Enhancement Act. The Secure Act was introduced as part of the government’s year-end spending bill. The bill has already been approved by the House of Representatives and the Senate. It will now go to the president for the final signing into law.
Experts have been warning Congress for years that Americans are ill equipped for retirement. About a third of U.S. adults have never had a retirement account. The Secure Act is bringing a slate of changes to current retirement contributions that are aimed at changing this trend.
The Secure Act aims to improve retirement in many ways including making it easier for small businesses to provide benefits for their employees. Small businesses will now be able to participate in multiemployer 401(k) plans. Businesses will also enjoy tax credits for participating in these plans and offering automatic enrolment to new employees. The hope is that less people will opt-out of a retirement plans or forget to opt-in altogether.
In order to improve retirement prospects for part-time workers, businesses will now be required to let long-term, part-time workers become eligible for retirement benefits depending on how many hours they’ve worked in a given year.
There are also changes to the way retirees can manage their plans. Previously, retirees needed to begin withdrawing from their retirement accounts immediately, but under the new bill they will be able to wait until age 72 which should ease some of the tax burden.
Smaller but notable changes include:
• The maximum contribution age for retirement accounts has been repealed. This means workers will be allowed to continue contributing to their accounts past the age of 70.5.
• Over 500 types of college savings plans will now allow funds to go toward student-loan debt.
• Workers with a 401(k) plan will now be able to withdraw up to $5,000 from their account, penalty- free to cover the cost of having a child or adopting a child.
The Secure Act is the biggest legislative change to the American retirement system in over a decade.