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What those saving for retirement should know about the SECURE Act

On Behalf of | Aug 14, 2023 | Elder Law |

In 2019, the federal legislature passed a bill called the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The original SECURE Act allowed more workers to make contributions to traditional IRA retirement savings accounts and increased the age at which someone can start receiving distributions from 70.5 to 72, while also making 401(k) plans accessible to certain part-time workers.

In 2022, the legislature revisited the SECURE Act by proposing the SECURE Act 2.0. The President signed the bill into law at the end of 2022. Many people planning for retirement find this new law confusing. What do people need to know about the SECURE Act 2.0?

The law adjusts certain rules

From the automatic enrollment of new hires in 401(k) plans to catch-up contributions and rules for matching employer contributions based on student loan payments, there are many rules that have changed for different types of retirement savings plans now that the SECURE Act 2.0 has been signed into law. Employers now need to automatically enroll eligible employees in available retirement plans by withholding between 3% and 10% of their pay as contributions. The law also allows people to delay receiving required minimum distributions at age 75 as of 2033. This lets them preserve more for later in life and build interest for longer. The rules also reduce the penalties for not taking required distributions. As for catch-up contributions, the new rules adjust the limits based on cost-of-living in future years and immediately increases the limit to 150% of the previous catch-up limits.  Although the goal is to help more people save more effectively for retirement, the  SECURE Act 2.0 has left many people feeling confused.

Changing laws necessitate professional support

The SECURE Act certainly does not make saving for retirement easier or more accessible, but it does potentially help eliminate some of the financial challenges people face when attempting to set aside enough resources for their golden years. The closer someone is to retirement and the higher their overall standard of living, the more important it becomes to engage in proper planning for financial security during retirement. Generally speaking, the average adult find complicated financial and tax rules confusing, especially when there are new adjustments to those rules.

The best outcomes for retirement planning often involved working with professionals. Not only are financial planners important for retirement stability, but so too is the input from someone familiar with the laws that apply. Many people find that consulting with an attorney is a very important step for adjusting their retirement savings habits and their financial plans for later in life to reflect changing federal statutes.