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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our reporters and editors focus on the points consumers care about most — how to save for retirement, understanding the types of accounts, how to choose investments and more — so you can feel confident when planning for your future. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Saving for retirement and ensuring those funds last throughout your lifetime is now a little easier, thanks to a new bill passed by Congress. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law by President Donald Trump in Dec. 2019, aims to improve the nation’s retirement system. The bill’s 30 provide Americans with new opportunities to save and strengthen their retirement security across the U.S., whether they’re three or 30 years away from leaving their working days behind. “There is general agreement on both sides of the aisle that people need to be saving for retirement, and we want to create the incentives and vehicles for them to do so,” says Elizabeth Kelly, senior vice president at United Income who served as a special assistant to the president at the White House National Economic Council under the Obama administration. “More changes are needed to help make sure that all Americans are prepared to live a secure and dignified retirement, but the vast majority of the provisions are a step in the right direction.” The SECURE Act’s passing means it’s now the biggest legislative change to the retirement system in more than a decade, when the Pension Protection Act was passed in 2006. Here’s a breakdown of the SECURE Act and how you can expect it to impact your retirement savings. What is the SECURE Act and why does it matter
The reality surrounding retirement is bleak: A lot of Americans aren’t prepared. , according to a Nov. . A separate Bankrate survey from May 2019 found that nearly for when the day they ultimately leave the workforce. Contributing to that bleak picture is an issue of accessibility, Kelly says. Thirty-three percent of private sector workers don’t have access to a retirement savings plan as of March 2019, according to the Bureau of Labor and Statistics. Those numbers are even more grim for part-time workers and employees at small firms. Nearly 39 percent of individuals who work less than 35 hours each week or pension plan at work, according to the Labor Department report, while 54 percent of workers at businesses with fewer than 100 employees had access to only a 401(k), according to BLS. “We know that the best way to get people to save is to offer them a workplace retirement plan, and ideally, to automatically enroll them in that plan,” she says. “The goal [of the bill] is to give people the tools to be better prepared by increasing the availability of retirement savings plans.” People are also living longer and working much later in their lives. The remaining provisions are “basically intended to update the rules to increase longevity” of individuals’ funds, Kelly says. How the SECURE Act impacts retirement plans
Though there are 30 updates to the retirement system, here’s where you’ll see the most impact, according to retirement experts. 1 Includes part-time employees
Previous laws allowed employers to exclude their part-time employees from eligibility for a . That won’t be the case, now that the SECURE Act is passed. Under this legislation, your employer must allow you to participate in its defined contribution plan if you work at least 500 hours hours during three consecutive years. This will help the growing number of baby boomers who seek part-time work instead of fully retiring, says Rhian Horgan, founder and CEO of Kindur, a retirement planning platform. “The old world where you retire at [age] 62 or 65 and go from working full-time to retirement isn’t what modern retirement looks like,” Horgan says. “We see more and more retirees sliding into retirement.” 2 Raises age requirement for required minimum distributions
Previous law required that participants start at age 70.5. The new bill raises that minimum age to 72. That’s intended to “ensure that individuals spend their retirement savings during their lifetime,” according to a . “It’s basically saying that you don’t have to take your minimum distributions until age 72 instead of age 70.5,” says Gene Steuerle, institute fellow and Richard B. Fisher Chair at the Urban Institute. “People are living longer.” The law also repealed the maximum age for , also currently set at 70.5. Under the SECURE Act, you can now continue contributing to your retirement savings plan, as long as you’re working. “As Americans live longer, an increasing number continue employment beyond traditional retirement age,” according to the bill. 3 New 10-year deadline on inherited 401 k s or IRAs
The SECURE Act changes how long you can hold on to a 401(k), a traditional IRA or a Roth IRA that . Previous guidelines said you could stretch the balance out over your lifetime, but under the new bill, those balances must be withdrawn within 10 years. But there are some exceptions. If you’re an individual with a chronic disability or illness, as well as a surviving spouse or minor child of the account owner, you would not be subject to these new regulations. “It’s both to raise money to pay for the provisions of the bill that may cost some money by virtue of increased savings being tax deferred, but also to make sure that the 401(k) plans and IRAs, are not being used indefinitely as a tax-deferred vehicle by the inheritors,” Kelly says. 4 Allows annuities to be offered in 401 k plans
are an investment that provides regular disbursements throughout a period of time in exchange for an upfront, lump-sum payment. Essentially, and can help prevent outliving your savings. Most 401(k) plans, however, don’t offer the option to purchase annuities – but that could change. The bill creates a safe harbor for employers, making them more likely to offer these plans. “It’s a recognition that we are living longer. Consumers today have to manage the drawdown of their assets,” Horgan says. “This move from pensions to 401(k)s is creating a tremendous amount of liability and responsibility for consumers.” But don’t expect that to happen all at once, says Shai Akabas, director of economic policy at the Bipartisan Policy Center. Employers will most likely roll out those plans gradually. “I don’t think that people are waiting to hit the ‘go’ button and will start offering them tomorrow,” Akabas says. “Over time, you’ll see additional employers considering this option. I would guess that it would be over several years.” 5 Permits multi-employer 401 k plans for small businesses
Opening up a work-based retirement savings plan such as a 401(k) can be costly for small businesses. As a result, many firms choose not to offer them, forcing employees to find savings plans on their own. A provision in the SECURE Act, however, seeks to change that. The bill expands employers’ abilities to offer multi-employer plans, as long as they have the same trustee, fiduciary, administrator, plan year and investment options, “making it easier for small employers to sponsor a retirement plan and thus improving retirement savings,” . The bill also offers tax credits of $500 intended to “defray startup costs” for new 401(k) and simple IRA plans that include automatic enrollment. “Basically, the idea is that you enable small businesses to band together and create one large retirement plan with the goal of lowering the administrative burden on each plan’s sponsor and costs,” Kelly says. 6 Requires 401 k statements to include lifetime income stream disclosure
For those between the ages of 30 and 39, , according to a Bankrate analysis of Labor Department data. That may seem like a lot, but if you’re trying to stretch it out over your lifetime into a monthly or even weekly stream of income income, it may seem like a different story. The new retirement bill requires benefit statements to include a disclosure illustrating “monthly payments the participant would receive if the total account balance were used to provide lifetime income streams,” according to text accompanying the bill. This could help you learn what still needs to be done regarding your retirement savings – and whether you should be contributing even more. How the bill may change the way you save
Outside of the retirement space, the SECURE Act provides extra opportunities to save elsewhere, by increasing your flexibility in covering costs associated with education and adoption. “People are increasingly viewing retirement security as a more holistic problem and a comprehensive financial security challenge,” Akabas says. “People are recognizing the fact that student loans and health care issues play into the picture of the retirement broader narrative. It’s fair to look at these provisions as going hand-in-hand with some of the more direct retirement provisions.” 1 Expands 529 account flexibility
The SECURE Act also , an investment vehicle that helps individuals save for higher education costs. The bill allows individuals to use funds within these accounts for apprenticeships and qualified student loan repayments loans of up to $10,000, according to the bill. “Creating more flexibility on 529s overall incentivizes savings and increases flexibility,” Horgan says. “Flexibility means that you’re more likely to try to save. When things are inflexible, you’re less likely.” 2 Allows adoption or child birth cost withdrawals
The bill allows individuals to withdraw up to $5,000 penalty-free from their retirement accounts to cover qualified costs associated with a new birth or adoption, as long as that distribution is made within a year. That means a couple could take up to $10,000 out penalty-free, granted they each have a separate retirement account. Taxes still will need to be paid on pre-tax contributions, and you’ll still want to carefully consider whether a withdrawal is worth it if it means excluding funds from decades worth of compound growth on your investments. But the good news is: You won’t have to pay an early-withdrawal penalty fee. Where the SECURE Act falls short
The nature of accounts such as 401(k)s and IRAs is that they’re self-directed; the account owner must be the one who chooses the investment strategy. But statistics don’t paint an overall rosy picture for that readiness: A found that 61 percent of Americans don’t know how much they will need to have saved to fund their retirement. Meanwhile, six in 10 non-retirees who hold these self-directed retirement savings accounts have little to no comfort in managing their investments, according to the Fed’s household well-being survey. “People need more choices, but it always then raises an extra challenge,” says Jeff Yastine, senior equities analyst at Banyan Hill who helps people invest for retirement. “People already feel overwhelmed by their choices when it comes to 401(k)s. (The bill) makes it more complicated for all of us to know and make the right choice.” The bill also doesn’t address other issues surrounding retirement, such as rising health care costs and Social Security insolvency, though it could protect people from those problems indirectly, Kelly says. “There are certainly bigger issues in retirement that need to be tackled outside” of the bill, she says. “To the extent the bill encourages more people to save, so that they have more money to cover future health care costs, more is better.” Bottom line
It’s a good time to review your current plan and find a strategy to increase your contributions, Horgan says. “If you’re under the age of 70.5 and working part time and haven’t participated in a plan, that’s encouraged for people in their 50s and 60s,” Horgan says. “It’s an opportunity to review your plan to create an income in the transition period.” If you’re one of these people to which benefits are now being extended, be sure to reach out to your plan provider about how you can enroll. And because the legislation creates so many new options for retirement savings, it increases the importance of educating yourself on all of the options at your disposal, so you can choose the plan that’s right for you, Yastine says. “That’s the curse of having a choice,” Yastine says. “If you don’t have a choice, it’s taken completely out of your hands. If you have three [to] five different choices, now the potential for confusion and misunderstandings grows exponentially. On the other hand, if you make better choices and you can get educated, you will have a better retirement than you might have had otherwise.” Learn more
SHARE: Sarah Foster covers the Federal Reserve, the U.S. economy and economic policy. She previously worked for Bloomberg News, the Chicago Tribune and the Chicago Daily Herald. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Related Articles