At times, it might seem as though laws governing your retirement accounts remain unchanging. The truth is, though, that politicians work on changes quite frequently and occasionally they even pass substantial legislation that impacts your overall estate plan.
The Setting Every Community Up for Retirement Enhancement Act became law as of January 1, 20202.
What the SECURE Act does
According to U.S. News & World Report, this recent legislation codified changes for long-term retirement plans and other financial impacts for nearly all Americans. You could see benefits from the SECURE Act in many areas of your estate plan.
If you worked part-time recently but did not work 1,000 hours a year, the new law could now allow you to contribute to a 401(k) plan. New eligibility requirements state that you must work at least 500 hours a year for three consecutive years. This gives part-time workers increased flexibility and power for planning retirement.
Another feature of the law allows retirees another 18 months before they must make minimum retirement account distributions. This will give you more time to manage your retirement money and increase the flexibility in portions of your estate plan.
Who the Act benefits
The SECURE Act has advantages for a broad spectrum of American workers and retirees. Understanding its features enables you to make the appropriate changes to an estate plan.
Younger workers also gain some flexibility with the legislation. For example, if you just had a child or adopted a child, you can take $5,000 from your 401(k) in that tax year. You can do this free of penalties and you can avoid paying income tax on the money if you repay the withdrawal as a rollover contribution.