Will the Secure Act Help Americans Save Enough for Retirement?

by January 23, 2020
The Secure Act may be just what Americans need to help them save for retirement. (Photo from Pixabay user qimono)

Late last year, The U.S. Senate handed Americans an early Christmas gift on December 19 by approving Setting Every Community Up for Retirement Enhancement Act, or the Secure Act. We initially reported on Secure after the nearly unanimous vote in the House of Representatives in August.

The new law took effect on January 1, 2020 and made it easier for small business owners to offer retirement plans, and for more workers, including part-time workers, to save. But critics say the new legislation doesn’t go far enough to help Americans sock away the nest egg they’ll need for a secure retirement.

That’s the bigger story for enterprising business reporters to follow, but first, answer these questions on your readers’ minds:

How will the Secure act affect your readers?

By helping them save all the tax-advantaged money that the Internal Revenue Service (IRS) allows. The U.S. Bureau of Labor Statistics notes that only 55% of Americans have a retirement plan at work. How does that statistic represent workers in your demographic?

Many part-time workers employed by small business owners could benefit, and older workers can now save up to 72, instead of taking distribution from a retirement account at 70½, as previously required. Those with a 401(k) plan at work can benefit, too, by also contributing to a Roth Individual Retirement Account (IRA). Most (60%) U.S. workers with a 401(k) plan didn’t know they can contribute to a Roth IRA, according to a survey conducted by TD Ameritrade in August 2019.

How will the Secure act affect my small business?

The Secure Act allows small businesses to offer less expensive “safe harbor” retirement plans to part-time employees. Owners will also receive a tax credit of up to $500 a year if they create a 401(k) or SIMPLE IRA plan with automatic enrollment. Will offering a plan help these owners retain workers? Ask a panel of small business owners if they are thinking about setting up a plan for part-time workers. Only 28% of small business owners with less than 10 employees have retirement plans, and 34% don’t have one for themselves, according to SCORE, a nonprofit that mentors small business owners. Almost half (48%) of employees who left a small business job because of the lack of a retirement plan, SCORE found.

What else do I need to know about Secure?

There are tax disadvantages for those who inherited a “stretch” IRA after December 31, 2019. Instead of stretching out the money over their lifetime, non-spouse beneficiaries will now be required to withdraw all the money in an inherited IRA within 10 years of the original accountholder’s death. Find a few readers impacted by this change of law and ask if they have assessed a strategy to deal with this change of law. Loop a financial planner and a Certified Public Accountant into your discussion. The new law is estimated to raise $15.7 billion in additional tax revenue for the federal government.