A new bill called the SECURE Act is likely to pass that will help people save for retirement.
Here’s what you need to know.
“The overarching goal of the SECURE Act is to help give Americans a boost in their retirement planning, expand access to retirement plans for part-time workers and employees at small businesses, and offer expanded access to financial products that help ensure steady lifetime income when they retire,” said Jim Poolman, executive director of the Indexed Annuity Leadership Council, a coalition focused on education and helping Americans save for retirement.
SECURE stands for Setting Every Community Up For Retirement Enhancement, and one of the main things it will do is give broader access to 401(k)s.
“The SECURE Act would help part-time workers, a group that has traditionally had little access to employer sponsored retirement plans, by providing an incentive for small businesses to offer 401(k)s,” Poolman said.
The act provides incentives for small businesses that allow part-time workers to become eligible for retirement benefits.
“Also under this legislation, all employers who currently have defined retirement contribution plans must include their part-time workers, if they work at least 500 hours a year and have been at the company for at least three consecutive years,” Poolman said.
Another provision of the act is that it will eliminate the maximum contribution age, currently 70 on most plans, he said. In simple terms that means a person doesn’t need to stop saving for retirement at 70 and can continue to contribute to individual accounts until a later age.
“Everyone’s situation nearing retirement differs, but in general waiting longer can help increase your savings depending on the financial products in your retirement account,” Poolman said.
Whether people can wait longer or not to make withdrawals from their retirement accounts depends on many factors, Poolman said. Did they create a retirement plan that will help cover their living, health and other expenses? Have they factored into their retirement planning financial products that will help their nest egg continue to grow?
One financial product that workers will be able to add to their retirement planning, if the SECURE Act becomes law, is the addition of annuities, which can provide a steady stream of income during retirement.
“Annuity benefits, such as providing a fixed and steady stream of income during retirement, can help prevent retirees from outliving their savings,” Poolman said. “This legislation would create a safe harbor for employers, making them more likely to offer annuities.”
If you have 15 years before retirement or less, it’s important to know how this legislation will affect your savings strategy.
“There are several things workers should think about. If before workers didn’t have access to employer-sponsored retirement plans, their small-business employers will be given incentives to do so with passage of the SECURE Act,” Poolman said. “Workers should look at their retirement portfolio and make sure they know where they are. Free resources such as retirement planning calculators [online] can help with this step. Knowing where you are is the first step in being able to plan for the future.”
The bill passed the House in May and is expected to pass the Senate before the current session ends in December.