The recently passed SECURE Act loosens up some rules around contributing to and drawing from IRAs, gives employers incentives to offer their employees access to 401k retirement accounts, and changes the game (not for the better) for anyone who inherits an IRA from a parent.
On balance, the changes are positive and give individuals more flexibility to save longer and draw on their retirement savings later, says Kevin Rose, an owner of accounting firm Market Street Partners.
"People are working longer, and there's uncertainty around the future of Social Security," he says. "It definitely helps."
Here's a rundown of some major provisions of SECURE (which stands for Setting Every Community Up for Retirement Enhancement, because legislators love acronyms).
Under previous law, anyone working past age 70.5 could not contribute to a traditional IRA. Starting in 2020, the SECURE Act will remove that age restriction.
In addition, most retired people were previously required to begin drawing minimum distributions from their IRAs at age 70.5. Under the new rules, if you have not yet reached age 70.5 by the end of 2019, your new required beginning date for those distributions will be age 72.
The SECURE Act also requires employers who offer a 401k to give access to the program to part-time workers who have worked 500 hours for three consecutive years. And it gives small employers up to $5,000 in tax breaks for setting up 401K programs for their employees.
But another change written into the rules makes it harder for people to pass their tax-protected retirement accounts on to their children.
In the past, a non-spouse beneficiary of an IRA or retirement plan like a 401k could take required minimum distributions from the plan over their own life expectancy. But starting on Jan. 1, 2020, if the owner of an IRA or 401k dies and leaves the accounts to a beneficiary other than their spouse, the beneficiary will only have 10 years to empty out the account.
There are exceptions for minor children until they reach the age of majority, individuals within 10 years of age of the IRA owner, the chronically ill and the disabled. The net effect will be to get that money back to taxable status more quickly, Rose says.
"It's a revenue raiser to offset some of the other provisions," he says.