Saving for retirement is always a complex issue with lots of moving parts, and moving them correctly is crucial to having a comfortable and stress-free old age. Now, after the SECURE Act took effect on January 1, things got even more complicated.
What is the SECURE Act?
The SECURE Act, which stands for Setting Every Community Up for Retirement Enhancement, is meant to help people save more money for retirement. But that may be easier said than done if you don't have a deep enough understanding of its intricacies.
The SECURE Act introduces some new features. For one, it removes the age limit for contributions to individual retirement accounts. Also, the age at which people are required to start taking minimum withdrawals is now 72, raised from 70 and a half. Last but not least, investors will no longer be able to stretch IRAs' tax benefits across an heir's lifetime.
While the SECURE Act can be viewed as a sum of positive and negative changes, it's important to note that navigating them correctly is what will largely determine just how positive or negative they are.
More Access to Workplace Retirement Accounts
The SECURE Act eliminates some of the roadblocks to saving, like the aforementioned age restriction. With that, small businesses should have an easier time constructing retirement plans for their employees around tax incentives and other flexible work arrangements.
Roth IRA Conversion
One thing you can do to take advantage of the removed age restriction for IRA contributions is to convert your 401(k) in order to grow your savings tax-free.
Non-Spouse IRA Inheritance
With the new legislation, the "stretch IRA" is gone, meaning instead of stretching withdrawals over a lifetime, a non-spouse beneficiary will now have 10 years to draw down on the account and pay income tax on it.
The SECURE Act has a few more idiosyncrasies, and it's probably best to consult your financial advisor in order to make sure you are fully prepared for the future.