3 Things You Should Know About the SECURE Act
The world of finance is continuously shifting, whether it’s through stock market trends or how you need to file your taxes. Retirement is no different. At the end of 2019, significant changes were in the world of retirement finance as the President signed the new SECURE (Setting Every Community Up for Retirement Enhancement) Act into law.
The bill encompasses many new measures and provisions aimed at assisting older Americans from outliving their assets in retirement. However, we wanted to highlight 3 of the changes the bill will make to your retirement planning.
Required Minimum Distribution Age
Before the SECURE Act passing, the minimum age that retirees were required to start withdrawing from their 401(k) or IRA accounts. However, with the average American retiring later and later, that age has now been raised to 72. This change may also have tax implications depending on the account holder’s tax bracket. Be sure to do your research before planning your withdrawals. Also, those who turned 70.5 in 2019 are still required to withdraw their required distribution this year.
Long-Term Part-Time Employee 401(k)
In the United States, over 27 million people work part-time jobs. It only makes sense that the new bill would also create new opportunities for part-time employees to receive retirement benefits. The bill now requires that employers who maintain a 401(k) plan have employees be eligible if that completes a one year service requirement or three years of consecutive service.
Auto-Enrollment Benefits for Employers
The SECURE Act introduces several new benefits for employers who auto-enroll their employees in retirement plans. The pivotal change applies to small businesses. Under the new bill, it is now easier for small businesses to set up 401(k) plans by increasing the caps for workers’ retirement plans from 10% of wages to 15%. The bill also provides employers a max tax credit of $500 per year to create plans with auto-enrollment.
With the SECURE Act now firmly in place, thousands of America’s workforce now have the potential to retire. However, to truly make the most of your retirement, be sure to plan with a professional financial planner.
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