7 Ways the SECURE Act Changes Your Retirement and Savings

Just before the holidays got into full swing, when saving for retirement probably wasn’t on your mind, Congress passed a massive spending bill. While that may not sound like something important for your personal finances, it is.

The SECURE Act is the most significant overhaul of retirement and other saving rules passed by Congress in more than a decade.

The SECURE Act, which is an acronym for Setting Every Community Up for Retirement Enhancement, was attached to the bill and signed into law on December 20, 2019. It’s the most significant overhaul of retirement and other saving rules passed in more than a decade.

In this post, I’ll cover seven significant ways the SECURE Act changes retirement for individuals and the self-employed. The law makes many updates, but the regulations I’ll highlight affect typical Americans the most.

How the SECURE Act affects your retirement

Here’s what you should know about seven main ways the SECURE Act affects your savings and retirement starting as early as 2020.

1. Traditional IRAs can be used longer

One of the most notable changes in the SECURE Act is the opportunity to save more money. Now, you can make contributions to a traditional IRA for your entire life—or at least for as long as you have earned income—just like you can with a Roth IRA. Previously, the cut-off for making traditional IRA contributions was age 70½.

If you plan on working into your 70s, you can continue saving money in a traditional IRA. If you have earned income of $7,000, those over age 50 can contribute up to that maximum amount to a traditional IRA for 2020. If you’re younger than 50, you can contribute up to $6,000.

Now, you can make contributions to a traditional IRA for your entire life as long as you have earned income. Previously, the cut-off for making traditional IRA contributions was age 70½.

The spousal IRA rule also applies, which allows a married couple filing taxes jointly to each max out a traditional IRA, even if one spouse doesn’t earn any income. If you have household earnings of at least $14,000, both spouses over age 50 can contribute up to $7,000.

Making traditional IRA contributions for a more extended period allows you to save more and get valuable tax deductions. Since contributions are tax-deductible and reduce your modified adjusted gross income, they help older workers cut taxes, reduce Medicare premiums, and get the most out of their Social Security benefits. This new regulation can make a big difference for...

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