4 Retirement Benefits of the New SECURE Act – The Rules – They Are A-Changin’!
There are things brewing in Washington, DC, that may nicely “season your pot” of financial assets available for your fall season of life. The House of Representatives recently passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019. It is now on the way to the Senate.
I love to cook and continue to look for ways to take a recipe and make it my own. The same can be done with the financial ingredients you have so that you can create a meaningful retirement experience.
On the cusp of retirement, many women have questions on how to maximize, and how to ladle out, what is in their financial “pots.”
These would include but are not limited to qualified plans, IRA’s, home equity, and Social Security. Upcoming changes will benefit you and provide some new opportunities. Let’s dig into what is cooking.
Contributions and Distributions
Women, in general, have spent less time in the work force because of family commitments and have not contributed their potential to retirement plans. Many ladies are picking up the mantle later in life to create a career or head into the work world.
Currently, you can’t contribute to a personal traditional IRA past age 70 years and 6 months, although you can still contribute to a ROTH IRA (if you meet income requirements). You also are required to start taking distributions (known as RMD) at 70 ½.
The new provisions include eliminating the maximum age you can contribute to a traditional IRA and pushing back the start of the Required Minimum Distributions from age 70 ½ to age 72 (possibly age 75 if the Senate’s similar legislation passes).
With the challenge of longevity and concern over adequate saving potential facing women, this new law may help those wanting or needing to save more as they head into their golden years.
In the US, there are over 27 million part-time employees – mostly women. If you have been at a company at least three consecutive years and work at least 500 hours a year, this new legislation requires that your employer allow you to participate in its defined contribution plan (i.e., 401K).
This will be a huge boon for ladies unable to work full time because of other commitments – or wanting part-time employment as they age.
Defined Contribution Plans – Lifetime Income Disclosure
Similar to the report you can get from Social Security to keep an eye on “what you can expect,” this bill would require that plans deliver an income disclosure annually that would show how much income the lump sum balance in the retirement account could generate.
When women understand their financial reality, they have peace of mind in what they have and how long it will last them. This empowers them to make decisions on what to do next, even as they are still working on figuring out the methodology for calculations as many variables need to be personalized per participant.
These calculations include: what rate of return to use for what life expectancy? Is there a spousal continuation element included? And so forth.
Increase Annuity Options Inside Retirement Plans
Women, on average, live six years longer than their male counterparts. As a result, many women fear that they will run out of money. The SECURE Act will open the path for 401k administrators to offer annuities inside their retirement plans.
Annuities are complicated products, but they do offer a way to hedge against longevity risk. In other words – you can’t outlive your income! Along with Social Security, you know what your monthly income is for as long as you live.
The landscape for women in their fall season is changing dramatically. I call it “rewirement.” Longevity to embrace and unfolding its’ potential, working longer by choice or necessity – this paradigm shift for aging women is exciting.
The gig economy is opening doors for creative income and minimizing expenses. We know that this life season will look different from those of our predecessors.
Create your version of true prosperity in this next iteration of yourself. Make sure you know what is happening as new laws are passed. Take advantage of opportunities that could help you maximize what you have to work with.
These are just a few of the components of legislation that will impact you. As the proposal moves forward, stay tuned for more on what is happening in Washington and how to create your tasty retirement recipe.
Do you think the SECURE Act will impact you in your retirement years? How? Please share with our community!