Headline:  Is the SECURE Act 2, secretly insecure?


Body  I just read a Great article about the SECURE Act 2.  The link is below


This Act is actually called the “Securing a Strong Retirement Act of 2020.”  This is a truly unique bill as it seems destined for bi-partisan passage through BOTH the House and Senate.   The only thing needed now, is the President’s signature.

What did the SECURE Act Pt. 1 do?

The original SECURE Act had one main (but important) change: it offered tax credits to small businesses if they would automatically enroll new employees.   There was some consternation because these small employers often offer annuities as part of their plan menu and critics felt that this Act was too kind to the insurance companies that administer these vehicles.  Additionally, under the 2019 Act, if a person inherits an IRA, they have only 10 years to liquidate the assets of that inherited IRA.

How does the SECURE Act Pt. 2 change things?

One of the chief components of SECURE 2.0 would be automatic enrollment of new employees into an employer’s retirement plan.   They would have an opportunity to “opt out”, but this would require and affirmative act on their part, and research suggests that new employees usually take the easier approach when starting a new job.  And under this potential legislation, all that they would have to do to be enrolled is to do nothing.  This has been proven to increase participation in retirement plans, and this would allow Americans to depend less upon an over-stressed Social Security system.

In a second change, the timing of Required Mandatory Distributions (RMDs) would be altered.   At first, under the Traditional IRA plan, participants had to begin taking RMDs at age 70, and SECURE Act 1.0 increased this minimum age to 72.  If passed, SECURE Act 2.0 would raise this minimum age again to 75.  Before your eyes get too heavy, this is important because it is usually to the benefit of the retiree to maintain as much money as possible within their retirement plan.  Once out, they lose the tax deferral (under the Traditional  IRA) and they further have to now manage these funds personally.

In a third important change, the proposed Act would introduce changes to the credit for contributions to a retirement plan.   This change would afford certain lower-income individuals further motivation to contribute to their own retirement.  

One final change in the proposed Act would create a national database that would record if retirement accounts were “left behind” when an employee changes jobs.   This is so important to recognize the reality of today’s workplace.   In the past, a person would often work for one company for their entire working life.     No longer do companies give pensions or gold watches upon retirement, people  are much more often changing jobs in order to acquire new experiences or improved salary.  When they do switch employers, they sometimes forget to move their retirement account to the new employer’s plan.  This clearinghouse would provide Americans the opportunity to make sure that there is not a pot of money with their name on it, languishing in the program of a former employer.  I have switched employer 5 times since I graduated from college, and I am not unique.   So this national clearinghouse would help many Americans to depend less upon Social Security.


What does all of this mean for me?

This got more technical than I really wanted to.   Sorry. 

Taken in total, it seems that the changes enacted by the 2019 Act and proposed in the 2020 Act appear to be good for most people.   There are some people who could be negatively affected, but largely, these are high-income individuals and families that have access to proficient Financial Planning professionals.   Rest assured, these professionals are quite busy reviewing the legislation and strategizing the best way forward for their clients.  (For instance, the AICPA already has an educational product for sale to better inform their practitioners about the changes.) 

I really did mean to make this entertaining…

I understand that this might all be very dry, but I promise that it is vital to your future.   One of the largest concerns of retirees is outliving their savings.  These 2 Acts, taken together, do quite a lot to assuage these fears.     Though we now have much more responsibility for our own financial future, we can look forward to being supported by our national legislation.


Congress Considers a New Round of Retirement Legislation (shrm.org)

2.0Sectionbysection_final.pdf (house.gov)

How the Secure Act 2.0 Will Put Your Retirement Savings Into Full Swing (moneywise.com)

New bipartisan retirement bill builds on SECURE Act – Willis Towers Watson

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

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