The SECURE Act Offers New Opportunities for Individuals
Have you heard of the SECURE Act? The SECURE Act (Setting Every Community Up for Retirement Enhancement Act) was passed by Congress as part of a larger spending bill and signed into law by the president in December 2019.
The new law cancels the prohibition on contributions to a traditional IRA by someone who has reached age 70 1⁄2. Starting with 2020 contributions, individuals must still have earned income but no longer have to be under that age. Individuals can now wait until age 72 to take required minimum distributions (RMDs) from Traditional, SEP, and SIMPLE IRAs and retirement plans instead of taking them at age 70 1⁄2. (This is only for individuals who were not already taking RMDs).
Workers can now take penalty-free early withdrawals of up to $5,000 from their qualified retirement plans and IRAs to pay for expenses related to the birth or adoption of a child. Individuals with 529 college savings plans may now be able to use account funds to help pay off qualified student loans but only up to a $10,000 lifetime limit per beneficiary.
Part-time workers who work at least 500 hours in three consecutive years must be allowed to participate in a company’s elective deferral retirement plan. The previous requirement was 1,000 hours and one year of service. The new rule applies to plan years beginning on or after January 1, 2021.
Written by: Kenneth Price, CFP®, CFA®, ChFC®, CLU®, AEP®