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The new Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law by President Trump on December 20, is the most important retirement legislation in years. It offers critically important tools for retirement readiness.
For example, this law now enables small business employers who don’t currently provide 401(k)s the opportunity to offer employees participation through multiple employer plans. Small business employees will be eligible for employer-sponsored retirement plans next year and this change could add $1 trillion to 401(k)s over the next five years.
But, while the Trump administration acts, retirement issues are not getting top billing in the Democratic debates. CNBC’s Jim Cramer accurately observed last week that "Democratic candidates do not seem to care about American’s retirement savings accounts.”
The Democratic debates have failed to raise senior issues to any serious prominence. This offers conservatives an opportunity to zero in on retirement challenges and practical solutions.
The political depiction of seniors has long been portrayed as older folks worried about Social Security. This presidential election is an ideal time for conservatives to make it clear how their ideas are enabling Americans to better save for a productive and longer life future.
Only 50 percent of Americans own a 401(k). The SECURE Act allows us to highlight this valuable vehicle so that a larger majority of Americans understand solid retirement options. If you are a soon to be senior or in retirement, there are key items in the SECURE Act that will impact your nest egg.
The Minimum Distribution age for IRAs and 401(k)s has been increased. You no longer have to face mandatory withdrawal of your funds until age 70 1/2. You can wait until 72. That’s more time to grow your savings by staying invested in tax-advantaged vehicles.
Retirees or those who continue work into their 60s and early 70s can now contribute to their IRA until age 72. People who are lacking in retirement savings have additional funding flexibility for a few more years.
You now have an additional opportunity to execute a Roth IRA conversion. Unlike traditional IRAs, Roth IRAs are tax-free at withdrawal which is a sensible plan if one expects higher tax rates in the future.
Employees will soon have the option to select guaranteed lifetime income products or annuities in their retirement plans. Employers will be exempt from lawsuits (called safe harbor) if the insurer does not pay future claims.
The SECURE Act eliminated the “stretch” provision for IRA or 401(k) beneficiaries. Previously, a traditional IRA beneficiary had a lifetime to “stretch” the tax-advantaged benefits of bequeathed funds. Now that time frame to distribute the entire inherited retirement account has been reduced to 10 years after the death of the owner. Special exemptions still exist for the surviving spouse and minor children.
This economy is solid and is growing and offering employment opportunities to every age group in historic numbers. The workforce participation of Americans over the age of 65 is rising. Whether they work out of choice or necessity, senior employment is at an all-time high of 20.2%.
Trends like these require more political visibility. The Left has its own strategy, but it is not a serious or viable one. The American Association of Retired Persons (AARP) has made its presence felt at many Democratic candidate town halls by focusing on the price of prescription drugs. But conservatives can counter these narratives by sharing details about the advantages of the SECURE Act as well as private sector opportunities for retirement readiness.
These prospects offer much more to Americans than government handouts ever could.