SECURE Act basics: What everyone should know

May 14, 2021

We live in an ever-changing financial landscape, and staying on top of things can be difficult.

Your financial professional can be a key partner in understanding how new laws and changes in tax policies can impact your retirement saving and investments.

In late 2019, the government passed the Setting Every Community Up for Retirement Enhancement  Act, which could benefit retirees and retirement savers, as well as parents and college students. Here are six key changes, and what they could mean for you.

1. RMDs kick in at 72: IRS-mandated required minimum distributions from tax-deferred retirement accounts now begin at age 72 instead of 70½. 

The fine print: The deadline for taking your first RMD, which increases income and may push you into a higher tax bracket, is April 1 of the calendar year following the year in which you turn 72, then Dec. 31 every RMD after. Failure to take RMDs on time results in a 50 percent penalty.

2. IRA contributions aren’t restricted by age: Contributions to traditional IRAs are now permitted no matter your age, so long as you have earned income.

The fine print: Whether you’re working or not, you’ll still be subject to RMDs.

3. Inherited IRAs must be depleted within a decade: Other than a spouse, most inheritors of retirement accounts must now deplete those assets within 10 years. There are exceptions for a minor child and a few other categories.

The fine print: The new rule could generate significant taxable income for inheritors. If assets remain after 10 years, inheritors face a penalty equal to 50 percent of the undistributed amount.

4. 401(k)s are available to more part-time workers: Employers are now required to offer their workplace retirement plans to part-timers with three consecutive years of service of at least 500 hours per year, in addition to employees with more than 1,000 hours over 12 months.

The fine print: Newly qualified part-time employees can save money on a pre-tax basis and capture an employer match, if it’s offered.

5. College savings 529s can be used to pay back student loans: Owners of 529 college savings accounts can now use up to $10,000 to repay student loans for the account’s primary beneficiary, or siblings or stepsiblings.

The fine print: Those with excess 529 assets now have another penalty-free way to use them, though such funds would typically be used first to pay current college expenses.

6. Retirement savings can be used for adoption and birth costs: Account owners can now withdraw up to $5,000 from a 401(k), if the plan allows, or an IRA to pay for qualified adoption or birth expenses without penalty.

The fine print: Parents may be able to avoid taking on debt to cover such expenses, but tapping retirement funds early could put long-term savings goals at risk.

If you have any questions related to the SECURE Act or other financial issues affecting you and your family, feel free to contact me. There is no cost or obligation, and I’ll help assure you are making well-informed decisions about your financial future.

Mark E. Engberg, CFP, is a Charles Schwab independent branch leader in Rehoboth Beach. He is an Eastern Shore native and has 20 years of experience helping clients achieve their financial goals. Engberg and Stephanie Brown, MBA, independent financial consultant, offer a free, no-obligation consultation and portfolio review. Engberg and Brown can assist clients remotely if deemed appropriate and convenient; they have many tools and resources to help investors take charge of their financial future and own their tomorrows. For more information, go to


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