The better you understand your options when it comes to estate planning, the more power you have to make beneficial decisions. The Setting Every Community Up for Retirement Enhancement Act became law at the beginning of 2020.
It contains numerous provisions that impact how you can save for retirement. Most of these changes give you more options and greater flexibility for your estate plan.
Benefits for new parents
According to U.S. News & World Report, new parents can now take out penalty-free withdrawals from a 401(k) plan. Prior to the passage of the SECURE Act, most money withdrawn from a 401(k) before the age of 59 1/2 would incur taxes and a 10% penalty.
The SECURE Act allows a $5,000 withdrawal for parents after the birth or adoption of a child without any penalties. To avoid any income tax on the withdrawal, you can repay the money to your retirement plan as a rollover contribution.
Advantages for part-time workers
The SECURE Act also provides some new benefits for part-time workers, allowing more workers access to retirement plans. Previously, only workers with 1,000 hours each year could contribute to a 401(k), but now workers who work 500 hours a year for three consecutive years can contribute.
This provision kicks in in 2024, but the hours you work now will determine your eligibility for later years. This component of the SECURE Act gives more flexibility for part-time workers and can help them build a better retirement.
The SECURE ACT has many other features. It could help you put together a stronger estate plan for your future.