On January 1, 2020 Congress passed the SECURE Act, which stands for Setting Every Community Up for Retirement. The intent of this act is to enable more employers to offer a retirement plan for more of their employees. Additionally, it is to encourage more people to participate in retirement plans either through their employers or on their own. Today we are looking at the function of the SECURE act and how it may affect you or your family.

What The SECURE Act Does

Firstly, the goal of the SECURE Act is to improvement retirement opportunities for many Americans. How it does this is through several key strategies. These strategies include:

  1. Repealing the maximum age that someone can contribute to a traditional individual retirement plan (IRA)
  2. Increases the age of first Required Minimum Distribution (RMD) from 70 ½ to 72
  3. Allows long term, part-time workers to participate in employer sponsored 401(k) plans
  4. Parents can withdraw up to $5,000 from a qualified retirement plan within one year of a birth or adoption. Only applies for qualified expenses.
  5. Allows parents to withdraw up to $10,000 from a qualified 529 plan to repay student loans


Taking the above items one by one, let us look at the benefits of each.

  1. By repealing the maximum contribution age, adults over the age of 70 ½ can continue to contribute to an IRA as long as they remain employed. This enables more people to continue to build up their retirement savings. Then, this gives them greater financial security when they do eventually retire.
  2. For individuals who turned 70 ½ in 2020, they will not need to begin taking their annual RMDs until they turn 72. This again allows people to continue to work past the traditional retirement age and accrue more interest in their retirement accounts before distributions begin.
  3. Opening up employer sponsored 401(k) plans to employees who worked more than 1,000 hours in a year or 500 hours over 3 years means that even those who have previously been ineligible to participate in retirement plans can now begin to save for their future, giving them greater financial flexibility when they eventually retire.
  4. Birth and adoption can be quite expensive in this country. Under the SECURE Act, parents have more flexibility to utilize up to $5,000 of their retirement fund to help with these expenses. These qualified distributions are not subject to the 10% early withdrawal penalty and people can repay as a rollover to a qualified retirement account or IRA.
  5. If your child has already graduated from college and has any money remaining in a qualified 529 plan, that money (up to $10,000) can be used over the course of their lifetime. They must use it to repay any student loans they may have taken to help pay for college expenses. These funds can also be used to pay for certain apprenticeship programs.