Local finance professionals are helping people navigate changes to retirement rules and regulations from a law enacted in 2019.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), signed into law in December 2019, was a comprehensive solution to the issue of retirement savings.

It included provisions that increased access to retirement plans, gave more tax breaks and provided incentives for employers who offer these types of benefits.

It’s expected that this will have a huge impact on those who are retired or nearing retirement age as they may have new opportunities available to them.

“The changes of this act are far-reaching,” said Wendy Bennett, senior financial adviser at Bennett Associates Wealth Management, 122 S. Washington St.

“It impacts retirees who are thinking about their estate plans, baby boomers and Gen Xer’s who are focused on retirement and millennials and Gen Zer’s who will be the recipients of a great wealth transfer in the next few decades.

“Everyone needs to reevaluate their financial plans in light of the SECURE Act.”

Unraveling legislation

The SECURE Act is still being examined and the ramifications may be felt for years to come. As generations like the baby boomers age and, in turn, transfer wealth, legislation like the SECURE Act may change how that wealth transfer will occur.

Financial and estate planners are working with government entities and taking training to ensure they have a clear understanding of how the law will affect people.

“It’s not the financial (industry) in my view, that are confusing investors, it’s Congress,” said Howie Pentony, owner of Pentony Capital Management, 105 Adams Lane, Portersville.

“Investors never know what Congress is going to do next,” he said.

Saving incentives

Among highlights from the act are:

Repeals the maximum age for traditional IRA contributions.

Increases the required minimum distribution (RMD) age for retirement accounts to 72 (up from 70½).

Allows long-term, part-time workers to participate in 401(k) plans.

Offers more options for lifetime income strategies.

The changes allow people who didn’t previously qualify to start using things like 401k’s to save for retirement. The changes in the number of hours required to qualify means that part-time workers can start saving earlier than ever before.

“I’m in favor of anything that allows people to save more for retirement,” Pentony said. “Work hard, save your money and invest.”

Planning in uncertainty

Bennett Associates Wealth Management is working with individuals to help them navigate the new guidelines and changes to traditional retirement vehicles.

It is specifically looking at the impact of a few key components of the legislation and has addressed how people can take advantage of the changes.

Bennett offered the following three ways people can start to plan with the new guidelines.

“Delayed Required Minimum Distributions (RMDs) — this provides some great planning opportunities to coordinate with other facets of a client’s financial life,” she said. “By waiting until age 72, and given the right circumstances, things like minimizing the amount of Social Security subject to federal income tax or reducing or avoiding capital gains taxes on taxable investments (are possible),” Bennett said.

“Death of the Stretch, meaning the default is that retirement account beneficiaries must distribute the full balance of the account within 10 years — this also provides great planning opportunities,” she said.

The law requires non-spouse beneficiaries of inherited IRAs to withdraw and pay taxes on distributions from inherited accounts within a decade.

“Since there is no longer an RMD for an inherited IRA, (people) can strategize the timing of any distribution(s) to gain tax efficiencies. For example, (people) can take advantage of a low-income year by timing the distribution to coincide with that year,” Bennett said.

“Reviewing beneficiaries (including trusts) — assess the impact of withdrawing large balances on your beneficiaries, where they are in their career cycle (i.e. tax brackets); review old trust language before naming the trust as beneficiary.

“Does it direct the beneficiary to only take RMDs (which effectively no longer exist for inherited IRAs)? Will it cause the funds to be taxed at a higher trust tax rate depending on the type of trust?” Bennett said.

Looking to future

For those nearing retirement, the SECURE Act allows for more time to save for retirement by removing the maximum contribution age for IRAs, assuming an individual has earned income. Additionally, people have until age 72 to withdraw the Required Minimum Distributions.

People with more time before they retire can take advantage of employer retirement plans and matching programs. Employer retirement plans aren’t the only options.

“(People) can save for retirement by establishing a traditional or Roth IRA outside of any employer-sponsored plan (subject to certain income limitations),” Bennett said. “Utilize a Roth option if (possible) so you can generate tax-free cash flows for your retirement years.”

“Taxes are complicated, they play a key part of your savings, investments and retirement plans,” she said. “If you don’t plan ahead, you could miss out on savings opportunities and possibly pay more in taxes than necessary.

“Remember, it’s not what you make, it’s what you get to keep.”