A piece of legislation that recently passed the House of Representatives could have a significant impact on your retirement planning. The Setting Every Community Up For Retirement Enhancement (SECURE) Act was passed nearly unanimously by the House of Representatives (417-3), and has been “hotlined” by Senate in an attempt to get unanimous consent.
There’s a reason the SECURE Act is sailing through Congress – it contains some valuable, thoughtful provisions. A few interesting wrinkles in the act:
- The SECURE Act proposes increasing the age that triggers RMDs from 70 ½ to 72, which means you could let your retirement funds grow an extra 1 ½ years. It’s an acknowledgement that many folks are living longer and more willing to let their savings grow longer.
- Given that more Americans are living and working later in life, the SECURE Act proposes that you could contribute into your traditional IRA past the current cap of age 70 ½ (there are currently no age-based restrictions for a Roth IRA).
- The legislation offers three provisions designed to help more small businesses offer retirement plans. 1) It increases the tax credit available from $500 a year to 50 percent of their total startup costs; 2) The legislation adds a tax credit for small businesses that set up new plans that include automatic enrollment; and 3) The SECURE Act would make it easier for small businesses to join together to provide retirement plans to their employees.
Some provisions in the bill have received tough questions and scrutiny. For example, many advisors are concerned about the proposed elimination of the “stretch” provision for inherited IRAs. For years, the “stretch” provision has allowed non-spousal beneficiaries the option of stretching inherited IRAs out over their lifetime. Eliminating that option could result in some big tax consequences for beneficiaries.
It appears likely the SECURE Act will pass. If so, we’re going to see some impactful changes in how folks approach retirement and tax planning. To enhance your confidence and do what’s best for your savings, make sure your plan accommodates the changes in this bill.
The larger question is – are you and your plan agile enough to stay abreast of changes in the law, let alone your own personal life changes, as well as changes in the markets? Make sure you find an advisor you can trust to help you take advantage of opportunities and work to protect what you’ve saved.