What does the SECURE Act do?

Not everyone feels good about their retirement plan. In fact, a report from the Federal Reserve found that fewer than half of adults over age 60 who are not yet retired feel that they are saving enough for retirement -- when at 60, we all hope retirement is at least visible on the horizon. A new federal law is aiming to help more Americans get on track.

As they say, education is the key to success -- whether that means researching independently or seeking the help of a financial planner -- as well as having a durable plan and sticking to it in the long term. The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law, becoming the farthest reaching retirement legislation in more than ten years. It helps people who are planning for their financial future in a variety of ways. 

Here are a few of the many things SECURE does: 

  • Makes it more affordable for small businesses to set up retirement plans by increasing the credit limitation for small employer pension plan start-up costs.
  • Helps graduate and postdoctoral students save for retirement by taking certain taxable stipends and non-tuition fellowship payments that are includible in income into account for IRA contribution purposes. 
  • Allows long-term, part-time workers to participate in 401(k) plans.
  • Allows home healthcare workers to contribute to a 401(k) plan or IRA. “Difficulty of care” payments are now treated as compensation for purposes of defined contribution plans and IRAs.

SECURE also makes it simpler for an employee to buy an annuity within a 401(k) account, if that route is the right choice for that individual. Purchasing an annuity is often a helpful component of a retirement plan, because it sets a person up for consistent, predictable future income along with safety and security. One option is to purchase someone else’s annuity when they need immediate cash, but more on that here

In addition to coming with less risk for employers, SECURE also requires 401(k) statements to project their income-based performance, providing more visibility and control for employees.

Check out the full legislation text and learn more about how these changes help Americans save for retirement.

Has the SECURE legislation impacted you individually, in the way you are saving for retirement? Let us know in the comments below.