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June 26, 2019

Making Retirement SECURE

Carroll Financial - June 2019 - Making Retirement SECURE

Date: June 26, 2019

Author: Kristopher W. Carroll, CFA®, CFP®

Estimated Read Time: 2 minutes


Amid ongoing partisan politics, the U.S. House of Representatives quietly and nearly unanimously passed a bill that would reform various aspects of America’s retirement laws.


What Is It?
The Setting Every Community Up for Retirement Enhancement (SECURE) Act passed quickly through the U.S. House of Representatives in April. According to Forbes, it is fundamentally “a mix of incremental improvements in 401(k) plans plus miscellaneous special interest provisions.”


What Does It Do?
While the SECURE Act has 29 new provisions, there are eight major changes worth examining more closely.

According to the most recent version of the SECURE Act, the bill will:

  1. Remove the age limitation on IRA contributions: This allows for workers of any age to contribute to IRAs and eliminates the existing cutoff at 70 ½ years old.
  2. Increase required minimum distribution (RMD) ages: The age when plan distributions are required is pushed from 70 ½ to 72.
  3. Allow penalty-free distributions for the birth of a child or adoption: This creates a new exemption from the 10% penalty tax for early withdrawals from retirement accounts offered in the event of a qualified birth or adoption within one year from the event.
  4. Remove “stretch” inherited IRA provisions: Beneficiaries of inherited retirement plans, such as 401(k)s, traditional IRAs and Roth IRAs, must distribute the account over a 10-year period rather than spreading the distributions over their own life expectancy.
  5. Increase small employer access to retirement plans: The bill expands the ability of small employers to offer a form of retirement savings to employees by allowing small employers to provide it in conjunction with other small businesses and share the costs.
  6. Increase annuity options inside retirement plans: New rules would ease liability concerns for employers regarding the annuities inside their 401(k) plans.
  7. Offer tax credit for automatic enrollment: A tax credit of $500 will be offered to help some smaller employers encourage automatic enrollment in their retirement plans. Employers are also permitted to auto-escalate their employees’ contributions up to 15% rather than the current 10%.
  8. Required lifetime income disclosure for defined contribution plans: Defined contribution plans must deliver a lifetime income disclosure to participants every 12 months showing how much income the lump sum balance in the retirement account could generate.


While the SECURE Act makes positive changes, it does not dramatically change the way saving for retirement works in the United States. A similar, almost identical bill called the Retirement Enhancement and Savings Act (RESA) is currently in the Senate. The bill is not yet finalized and modifications are probable. The SECURE Act smooths out some road blocks to retirement savings, but these changes are incremental. What fundamentally matters most about the SECURE Act and RESA is that they have nearly unanimous bipartisan support in a raging political climate.


Another recent development in financial services occurred earlier this month when the SEC passed a new law known as Regulation Best Interest (REG BI). It is intended to improve transparency and ensure that the client’s best interest is considered by enhancing the standard of conduct for broker dealers and their associates. We always put the best interest of our clients first at Carroll Financial. Therefore, this new bill will affect very little of what we do, though you may see some new disclosures and account paperwork.


Bottom Line: Regulations and SEC laws will continue to evolve, but Carroll Financial will still be here and our ongoing business will not be affected. We are always working in your best interest.

Investing & Saving, Retirement

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