Tom and John Mills' Common Cents: New SECURE Act impacts retirees. What you should know.
Common Cents

Tom and John Mills' Common Cents: New SECURE Act impacts retirees. What you should know.


With all the incredible news that has recently come our way, few people may have noticed an important bill that passed in late 2019. This new bill will have a considerable impact on the retirement of many Americans.

On Dec. 20, 2019, Congress quietly passed the SECURE Act. The SECURE part of the SECURE Act is an acronym that stands for Setting Every Community Up for Retirement Enhancement.

The SECURE Act was passed with bi-partisan support to update several outdated laws regarding retirement. People are living and working longer. More people are also working part-time as a choice or out of necessity.

Before the SECURE Act, individuals with IRAs were generally required to begin taking the required minimum distributions the year they turned 70 and a half. The new law now moves the required minimum distributions age to 72.

Americans can also now contribute to their IRAs passed age 70 1/2 as long as they have earned income.

The IRS allows very few reasons to pull money from an IRA early penalty-free, but the SECURE Act creates another. There is now a qualified birth or adoption distribution. This distribution allows new parents to take up to $5,000 from an IRA penalty-free.

This new provision will help new parents offset some of the costs associated with growing their families.

Many Americans are being crushed under the burden of student loans. The Secure Act also contains a provision that may help alleviate that burden. Starting in 2020, those with money in a 529 plan can now use up to $10,000 to pay down student debt.

Some retirement plans are available only to those who work full time, which no longer fits. Many Americans work part-time out of necessity or choice, and some of those would like to participate in an employer-sponsored retirement plan, but don’t qualify.

The SECURE Act now requires some employers to open up retirement benefits to some part-time employees. Until now, only employees that worked more than 1,000 hours were eligible to participate in a 401(k).

Now, employees that work 500 hours annually over three consecutive years are eligible to participate in 401(k)s. This may be a great help to some part-time employees.

Before 2020, non-spousal beneficiaries of retirement accounts were required to take annual distributions from those accounts. Those distributions could be stretched out over the entire life of the beneficiary.

The new law will force non-spousal beneficiaries to empty the inherited IRA within 10 years. This part of the law will potentially cause the most significant change in planning for retirees.

The SECURE Act has much more in it than can be written here. I encourage all to look into it. I especially encourage small business owners to take a closer look. There are quite a few benefits and credits available to employers who start retirement plans.

Tom and John Mills are registered investment advisers and certified financial planners. Reach them at 254-0155. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group (SWAG), a registered investment adviser.

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