Could a extensive new bill help the country overcome its retirement crisis?
That’s what some lawmakers envision with the Mounting Every Community Up for Retirement Enhancement Act of 2019—better known as the SECURE Act. The far-reaching bill includes 29 accoutrements aimed at increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets.
Key Takeaways
• The Get hold of Act would make it easier for small business owners to set up “safe harbor” retirement plans that are less valuable and easier to administer.
• Many part-time workers would be eligible to participate in an employer retirement plan under the jaws.
• The legislation, which passed overwhelmingly in the House, remains tied up in the Senate.
A Troubled Retirement System
That there’s vexation brewing in the U.S. retirement system, which requires most workers to supplement Social Security with personal savings, has been greatly acknowledged. According to data from the U.S. Bureau of Labor Statistics published in 2018, only 55% of the adult denizens even participate in a workplace retirement plan—whether defined benefit or defined contribution.
The wealth management behemoth Vanguard, for instance, revealed earlier this year that the median 401(k) balance for those ages 65 and older is exactly $58,035. The SECURE Act aims to encourage employers who have previously shied away from these plans, which can be precious and difficult to administer, to start offering them.
“With passage of this bill, the House made significant upgrade in fixing our nation’s retirement crisis and helping workers of all ages save for their futures,” Rep. Richard E. Neal (D-Mass.) told in a statement after the bill sailed through the House via a 417-to-3 vote in May.
Major Provisions of the SECURE Act
The Assumed Act would tweak a number of rules related to tax-advantaged retirement accounts. For example, it would:
- Make it easier for little businesses to set up 401(k)s by increasing the cap under which they can automatically enroll workers in “safe harbor” retirement charts, from 10% of wages to 15%.
- Provide a maximum tax credit of $500 per year to employers who create a 401(k) or SIMPLE IRA down with automatic enrollment.
- Enable businesses to sign up part-time employees who work either 1,000 hours from the beginning to the end of the year or have three consecutive years with 500 hours of service.
- Encourage plan sponsors to encompass annuities as an option in workplace plans by reducing their liability if the insurer cannot meet its financial obligations.
- Pester back the age at which retirement plan participants need to take required minimum distributions (RMDs), from 70½ to 72.
- Assign the use of tax-advantaged 529 accounts for qualified student loan repayments (up to $10,000 annually).
Planners Evaluate These Transforms
While retirement planner Marguerita Cheng, CEO of
Tangled Up in the Senate
Despite the SECURE Act’s overwhelming support in the House, it may mulct time before the Senate even gets to vote on the bill. In early July,
The Bottom Line
While it’s unruffled possible that the SECURE Act will go through some minor changes, the bipartisan support behind the legislation great it’s likely to end up passing in the Senate, too. Whether it ends up being a game-changer or not remains to be seen. But one thing is abundantly clear: The stylish rules aren’t allowing nearly enough Americans to put away the nest egg they’ll ultimately need for a secure retirement.