Retirement security has been a featured topic with legislation over the past several years and was recently on the agenda again.  Back in December of 2019, Americans saw a number of changes to their retirement savings plans when the Setting Every Community Up for Retirement Enhancement Act, or the SECURE Act, became law.

One requirement that came from the SECURE Act was the addition of two lifetime income illustrations for participant statements. These two illustrations are intended to help the participant visualize how much lifetime monthly income their current account balance could provide for them and for their surviving spouse, starting at the normal retirement age of 67.

The illustrations are based upon assumptions specified by the US Department of Labor (DOL) using a specialized retirement vehicle, called an annuity, and are calculated as if the participant converted their current account balance from a lump sum amount to a fixed, lifetime monthly payment.

The sentiment of this requirement is to encourage more Americans to be engaged with their financial future and ultimately to save more. Greenleaf Trust is compliant with the required timeline and all participant statements beginning with the June 30, 2022 quarter-end will include these illustrations.

Next on the timeline, in 2021, the House Ways and Means Committee unanimously voted to advance a second bill, the Securing a Strong Retirement Act of 2021, or the SECURE Act 2.0 that would continue to enhance the rules for contributing to and withdrawing from retirement savings vehicles, while providing tax incentives for small business owners.

Further Increase of the Required Minimum Distribution Age

The original SECURE Act raised the age at which you must start taking required minimum distributions (RMDs) from traditional IRAs, 401(k)s and 403(b) plans from age 70½ to 72.  The proposed legislation would further raise the age to begin taking RMDs, this time to age 75.  That means you could have more time for your money to grow tax free, but if you delay taking the RMDs, your withdrawals may need to be larger.

If passed, the age for RMDs would initially increase to 73, then to age 74 in 2029 and age 75 in 2032.