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The Secure Act is also known as the SETTING EVERY Community Up for Retirement Enhancement (SECURE) Act, and it was officially passed into law on January 1, 2020. It is a critical law because it changed numerous rules regarding retirement accounts, which means that it affects every individual that has a pension or savings account.

Here are a few things that you should know about the SECURE Act and how it affects your retirement savings.

  • It extends the minimum distribution age.

The minimum distribution age is the age at which individuals are required to start making regular withdrawals from their traditional IRAs. The age was previously set at 70 ½ years old, but it was extended to 72 as of April this year. This means that retirement account holders can differ their tax on their retirement funds for a while longer, allowing for more growth.

  • Age limits on IRA contributions have been abolished

The law previously allowed Individual retirement account holders to make contributions to their retirement accounts until they are 70 ½ years old. However, the SECURE Act now allows individuals to contribute to their savings even beyond the previous age limit as long as they continue earning an income.

  • New parents will not face penalties for withdrawals

The SECURE Act provides more leniency when it comes to withdrawals, particularly to parents that have a newborn. Previous laws warranted fines or hefty fees to any individuals that withdraw from their 401(k) or IRA before they reach 59 ½ years old. However, the IRS allows individuals to make specific circumstances.

  • Changes to IRA inheritance

Previous IRA inheritance guidelines allowed a spouse who inherited an IRA to make withdrawals for the rest of their lives. However, the new changes allow the spouse to withdraw the entire amount within 10 years. This means that you might be forced to meet the tax obligation on those savings sooner than expected.

  • Impact on small businesses

Small business owners will also be affected by the new changes. For example, the wage savings cap on retirement savings as per the “safe harbor” plan has been adjusted from 10% to 15%. Businesses that create a SIMPLE IRA plan or 401(k) plan for automatic enrollment of their employees will also receive a $500 tax credit annually.

  • Student debts

The new changes will also allow individuals to withdraw as much as $10,000 tax-free from their 529 plan to pay off their student loan debts.


These are some of the benefits that the average person should expect to take advantage of courtesy of the SECURE plan.