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10 Things You Should Know About the SECURE Act

The SECURE Act is packed with benefits for small businesses, retirees, and everyone who's saving for retirement.


The SECURE Act impacts everything from IRA contributions to Required Minimum Distributions (RMDs). Here are some key things you should know about this important legislation.

This is huge! The SECURE Act is the most meaningful retirement legislation to take effect since the Pension Reform Act of 2006. It passed both houses of Congress with bipartisan support and was signed into law by President Donald Trump on December 20, 2019.

There's an acronym for that. The word “SECURE” in the SECURE Act is an acronym that stands for “Setting Every Community Up for Retirement Enhancement.” Sounds good to us!

More time for compounding. The age for RMDs has increased from age 70½ to age 72. This allows investors to keep their money growing tax-deferred for longer. Those who turned 70½ prior to January 1, 2020 still need to take an RMD under the old rules. Remember, though, all RMDs have been suspended in 2020 due to the CARES Act.

More time for contributions. Under the old rules, you had to stop contributions to a traditional IRA at age 70½. As a result of the SECURE Act, you’re allowed to continue contributing to a traditional IRA for as long as you continue to work.

Part timers can join the party. Long-term part-time workers (those who work less than 1,000 hours per year) were generally ineligible from participating in a 401(k) plan. That restriction has now been lifted for employees who work 500 hours over three consecutive years or 1,000 hours in one year.

Small business owners unite. Prior to the legislation, only related businesses could join together to open multiple employer plans (MEPs). The new legislation makes it easier for unrelated businesses to join together to open MEPs. This could significantly increase access to retirement plans for millions of people who work for small businesses.

Lovin' my 529 plan even more. You can use funds from a 529 plan to pay off up to $10,000 in student debt for yourself or a beneficiary. 529 qualified expenses have also been expanded to include books, classes, and supplies for apprenticeship programs that are registered with the Department of Labor.

Time for some baby shoes. When you welcome a new baby or adopt a child, each parent can withdraw up to $5,000 each, penalty-free, from your retirement plan. If you’d like to repay the funds at a later date, you can do so through a rollover contribution to an eligible defined contribution plan or IRA. Be sure to discuss this with your plan administrator to ensure the rollover will be accepted and applied in this manner.

Automated wealth: Employers can choose to automatically enroll employees into a retirement plan even if they don’t sign up for it. Under the old rules, employers could defer up to 10% of an employee’s pay into the plan. This provision significantly increased retirement savings for individuals, so the SECURE Act increases the automatic contribution from 10% to 15%.

"Stretch" IRAs become less flexible. This is the only provision in the SECURE Act that is more restrictive than prior law. Under the old rules, if you inherited an IRA or 401(k), you could stretch out your distributions over your life expectancy. Now beneficiaries are required to withdraw the inherited assets within 10 years of the account owner’s death. Exceptions to this 10-year rule include a spousal beneficiary, a minor child, a disabled or chronically ill beneficiary, and a beneficiary who is less than 10 years younger than the original IRA or 401(k) account owner.

To learn more about how the SECURE Act may impact you, talk to your financial professional or tax adviser.

The views expressed here should not be construed as investment advice. They are based on available information and are subject to change without notice. The information above is intended as general information and is not intended to provide, nor may it be construed as providing, tax, accounting, or legal advice. As with all matters of a tax or legal nature, please consult with your tax or legal counsel for advice. This material and/or its contents are current at the time of writing.

Hartford Funds Distributors, LLC, Member FINRA. 

CCWP068     218749