Boltwood Capital Management | Retirement Changes on the Horizon?
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Retirement Changes on the Horizon?

In a showing of bipartisanship that has seemed increasingly rare lately, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed by the House of Representatives by a margin of 417-3 last week. The legislation makes a number of significant changes to retirement plans aimed at improving the access to plans and options for participants.

Although the bill still needs to be passed by the Senate and signed by the President, there is strong support and an expectation that this will occur. Here are a few of more notable items introduced in the current form of the bill:

  • The SECURE Act eliminates the “stretch IRA”, requiring inheriting beneficiaries other than spouses and minor children to withdraw funds within 10 years, rather than over their lifetime.

  • The SECURE Act removes the age cap for contributing to a traditional IRA. Currently, you are not allowed to contribute to a traditional IRA beginning in the year you turn 70 ½. There is no age cap for contributing to a Roth IRA.

  • The SECURE Act raises the age at which you must start taking required minimum distributions (RMDs) from 70 ½ to 72.

  • The SECURE Act includes provisions that make it easier for employers to include annuity options within a 401(k). Many employers currently choose not to include annuity options for fear of being on-the-hook for potential annuity-provider failures.

  • The SECURE Act allows for $5,000 to be withdrawn penalty-free within one year of a qualified birth or adoption. Currently, absent another exemption, withdrawals would be subject to a 10% penalty.

  • The SECURE Act also contains a number of provisions aimed at improving access to 401(k) plans, including expanding the ability for small employers to join multi-employer plans, providing tax credits for small employers auto-enrolling employees and requiring long-term part-time employees be eligible for plans.

For a full summary of the bill, see the following link:
https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE%20Act%20section%20by%20section.pdf