![]() ![]() These are changes that are “not going to be as immediately evident to the average American,” says Akabas “but they could have important effects down the road when we talk about gradually increasing the access that people have to a workplace retirement account and the structure of those accounts.” Removal of the ‘stretch IRA’Īnother change - significant for estate planning - is a provision that eliminates what is known as the “stretch IRA.” Currently it’s possible to put money into an IRA that can grow tax-free long after you die to benefit your children or even your grandchildren. The law also makes it easier for annuities to be included in a 401(k), which would allow employees to gain more predictability in their retirement income. A Pew analysis found that among workers employed by companies that offer a defined contribution plan, 28% of them are not participating. There are also a variety of less sexy provisions that would lower some of the barriers for workers to sign up for retirement accounts. The penalty-free withdrawals would be for any “qualified birth or adoption.” Lower barriers of entry to retirement plans As Portman noted earlier this year in a speech on the Senate floor, “we have to ensure that there is longer lifetime savings as people are living longer and healthier lives.”Īnother provision allows withdrawals from retirement plans if they are needed when people start or grow a family. Required minimum distributions used to begin at age 70 ½. The law also changes the age when IRA and 401(k) holders must begin to withdraw from their account (and pay taxes on that money). In 1996, the rate was 12.5% among Americans aged 70-74. There are no age limits on contributions to 401(k) plans or to ROTH IRAs.Īccording to the Bureau of Labor Statistics, the labor force participation rate among workers over 70 has jumped in recent years and is expected to continue to rise. Before, you were only eligible to contribute to a traditional IRA if you were younger than 70 ½. The Secure Act also includes a provision that eliminates the maximum age for IRA contributions. You’ll be able to contribute for longer (as you live longer) “Really, what we've done is turn apathy and inertia into our ally,” said Tobias Read, the founder of the program, during a recent appearance on Yahoo Finance. One state-level plan that features automatic enrollment is in Oregon. Another provision creates another tax credit to defray startup costs for new plans if those plans include automatic enrollment.Īutomatic enrollment has been shown to increase employee participation and lead to higher retirement savings. One section increases the tax credit to help a small business with plan start-up costs. The new law also includes new credits to small businesses to make it more affordable for them to offer their own retirement plans. The rules require employers to give their part-time employees access to company retirement plans once they work over 500 hours for three consecutive years or for 1,000 hours for a single year. ![]() The law aims to change that, at least somewhat. ![]()
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