The Setting Every Community Up for Retirement Enhancement Act become law on January 1, 2020. No matter what stage of life you belong to, the Secure Act made changes that can help your retirement savings grow.
Provisions of the Act can also help you avoid costly fees and taxes that could impact your estate plan.
The main features of the legislation
An article in U.S. News & World Report outlines the major features of the SECURE Act. The following provisions help both workers and retirees:
- An increase in the age for required minimum distributions from 70 1/2 to 72
- A repeal of limitations for IRA contributions due to age
- An allowance for penalty-free IRA withdrawals for new parents
- A provision for more part-time workers to contribute to 401(k) plans
One provision, though, could limit the flexibility of your estate plan. This change requires the taking of inherited retirement account distributions within 10 years instead of the previous 20 years.
The removal of age limitations for IRA contributions
Many of the features of the Act allow retirees and workers to exert greater control over their money. This could have benefits for your estate plan. Now, if you are over 70 1/2 you can still contribute to an IRA. You can do this as long as you have earned income in the tax year.
Also, if you work part-time in your later years, you might still have the opportunity to contribute to a 401(k) plan. Previously, requirements stated you had to work 1,000 hours a year for eligibility; however, with the new law, the threshold for legal 401(k) contributions falls to 500 hours a year, provided you do this in three consecutive years.