The SECURE Act marks another shift in the way we save for retirement. Here's how it affects you

Feb. 2--SCRANTON -- When it comes to saving for retirement, 18 months feels like a blip.

But for anybody on the cusp of retiring, it makes a big difference.

At the end of 2019, President Donald Trump signed the Setting Every Community Up for Retirement Enhancement Act -- graciously just called the Secure Act -- into law. Among a host of changes, the law raises the age for required minimum distribution from 70 1/2 to 72 (only for those who turn 70 1/2 after 2019), which gives anybody planning for retirement just a little bit more time to squirrel away cash, or plan their workforce exit in a way they can minimize taxes they pay on retirement money.

The law reflects a workforce trend. People are staying on the job longer and want to contribute to their individual retirement accounts or 401(k)s.

Under the new rules, savers who turn 70 1/2 after Dec. 31 have no cap on how long they can contribute to their traditional IRA.

The complex new law also marks another page in the story of the employer-funded pension plan's demise and also how anyone who dreams of retiring one day needs to take ownership of their future income.

Employer-sponsored retirement accounts, often called defined benefit accounts that provide a guaranteed income stream, have declined dramatically over the last 30 years as employers shift the liability to their employees, according to the Federal Reserve.

Employees can give their workers access to a 401(k), but few offer managed pension plans anymore.

The Sunday Times asked area financial advisers to explain a few key questions on how the Secure Act affects retirement savings. Here's what they told us on navigating the new regulations.

Could the Secure Act hurt my savings?

Maybe not yours, but it's got some tighter rules for whoever inherits your retirement account when you die. And it's really only if you've got a substantial pile of money socked away.

Anyone other than an eligible designated beneficiary, such as a spouse or minor child, will have to drain that account within 10 years.

"We have a massive deficit problem as a country and they (the government) want their tax revenue," said Elizabeth Witko of Drucker and Scaccetti. "They want taxes paid on that income stream."

Realistically, that's only a drag for retirees with retirement accounts of several hundred thousand dollars or more who plan on leaving them to their heirs.

"In my 28 years of doing this ... most people who inherit an IRA take it well within five or 10 years," said Lou Ingargiola of I&M Wealth Advisors.

If the money goes to a spouse, who isn't tied to the 10-year rule, she spends it down over time, he said. If children or grandchildren get it, they drain the account, split it up and move on.

Witko still encourages heirs to strategize on how to draw on that money within the 10-year window. For example a $100,000 account emptied in one year will load up your taxable income for that year more than a smaller $10,000 account will.

"It's definitely something that should be done in consultation with your tax advisor and your financial advisor," she said. "You can accidentally cause yourself a massive tax bill."

What's the upside?

The Secure Act expands the savings window, allowing more people to save longer, and it makes retirement saving accessible to a large group that previously couldn't save.

"It's to make it easier for small business employers to offer 401(k) plans, for the part-time workers to be able to contribute -- I thought that was a great addition," Witko said. "And then also to allow people to continue to contribute past the old restriction age."

Contact the writer:

joconnell@timesshamrock.com; 570-348-9131; @jon_oc on Twitter

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