What the proposed SECURE Act could mean for your retirement plans

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Congress is considering a bill that some lawmakers say could help Americans do better at saving for retirement and making that money last. The SECURE Act recently passed the House by a wide margin. If it passes the Senate and is approved by the president, the measure would do the following:

  • Allow people to keep contributing to traditional IRAs beyond the current age cap of 70½
  • Allow people to hold onto their retirement funds in 401(k)s or IRAs longer, until age 72 (currently you have to start making withdrawals at 70½)
  • Allow long-term, part-time workers to participate in company 401(k) plans
  • Make it easier for companies to offer annuities as part of their retirement plans. Annuities work like a kind of retirement insurance, designed to provide monthly income as long as a retiree lives.
  • Make it easier for small businesses to offer 401(k) plans by giving eligible employers a tax credit

The bill has its critics, however. Some say the SECURE Act will benefit insurers by giving them more opportunity in the multi-trillion-dollar retirement plan market — but won’t help middle class families and would actually make retirement savings plans less valuable.

Want to know more?

Why was the SECURE Act proposed?

Debate over retirement plan policy has been going on for a while. But there’s growing urgency as some observers see a crisis looming — not only for the current wave of retiring baby boomers who don’t have enough money, but for Gen X and millennials in danger of ending up even worse off in retirement.

Standard wisdom suggests people should be saving 10% to 15% of their income for retirement using 401(k)s and IRAs, but many Americans fall short of this goal. In addition, current 401(k) and IRA age caps are based on life expectancies calculated back in the 1960s. With life expectancy rising, many people will be working longer before retirement and still won’t have enough savings once they do retire.

Rep. Richard Neal, a Democrat from Massachusetts who supports the bill, has suggested the legislation will not only help American workers save more, but will encourage many smaller businesses to offer savings options they hadn’t in the past.

What can you do to save for retirement?

If the SECURE Act has you thinking about your retirement savings, here are some resources that could help.