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Earlier in December, legislation passed through the House which would make the biggest changes to America’s retirement system in 13 years. Chief government political affairs officer at the Insured Retirement Institute, Paul Richman, said, “The Secure Act has been years in the making. It’s filled with common-sense measures to strengthen retirement security for millions more American Workers.” In theory, the Secure Act will make it easier and less expensive for small businesses to offer their employees a work-based retirement system and increase access to retirement-savings plans. If passed, the bill can affect retirement in a number of ways; here are a few of the proposed changes.

Repealed maximum age for making contributions to traditional IRAs

The Secure Act is doing away with the age restriction for IRA contributions. Workers are now able to contribute to their IRA accounts even after the age of 70 ½. With rising life expectancies, people are now working longer. Studies have been done on the benefits of working longer, and according to a paper written last year, delaying retirement by even one year is an estimated 3.5 times as financially beneficial as saving an additional 1% over 30 years. 

Increased age for beginning required minimum distributions

A required minimum distribution (RMD) is the amount of money that must be withdrawn from a traditional, SEP, or SIMPLE IRA account by owners and qualified plan participants of retirement age. Prior to the Secure Act, participants must begin withdrawing from their retirement accounts by April 1 following the year they reach age 70 ½; the legislation raises this age to 72. The proposed rule would only apply to people who have not yet reached the age of 70 ½ by the end of 2019. 

Part-time workers can participate in 401(k) plans

The new rule makes it easier for part-time workers to participate in retirement plans.  Employers have been able to exclude part-time employees from participating in 401(k) plans but under the Secure Act, people who have either worked at least 1,000 hours in one year (about 20 hours a week) or three consecutive years of at least 500 hours, will be able to participate in retirement plans.