Is your retirement secure?

As we watch CoVid-19 wreak havoc on our citizens’ health and finances, one wonders about a future. A future we all hope is of good health and spirits but also one with a retirement free from privation and need. Wall Street and the federal government have historically encouraged us to save for retirement by our investing in pensions, 401(k) plans and I.R.A.’s. Because these funds are usually invested in the stock market, saving for retirement seems to work when the market goes up but fails us when we experience steep declines as have now happened. The logical collateral damage is our need to save more and postpone retirement.

So, what does our government do but find incentives to motivate more saving without saying the negative, that we may need to postpone retirement and keep working. The government’s method of motivation is the Secure Act (fully known as: Setting Every Community Up for Retirement Enhancement, effective January 1st, 2020).

So, what are the main points of this new retirement savings legislations?

  1. The government is no longer willing to wait for the Income Taxes it receives from pension and traditional I.R.A distributions. Under the old rules, distributions to a surviving designated beneficiary could be STRETCHED over the beneficiary’s life expectancy. For example, upon mother’s passing, her traditional I.R.A. or Retirement Plan could be paid to a designated child. A 50-year old surviving child could then withdraw the traditional I.R.A./pension monies over his or her life expectancy being 34.2 years; therefore, the child would pay taxes on distributions over the same period. Under the new SECURE ACT distributions to designated surviving children must be made within 10 years of mom’s death. To keep lawyers and accountants busy, our government included exceptions to the 10-year rule:
    1. A designated surviving spouse
    2. Minor child
    3. Disabled or chronically ill beneficiary
    4. A designated beneficiary who is not more than 10 years younger than the traditional I.R.A./pension participant.

For most citizens, the important exception is the designated surviving spouse can make withdrawals over his or her life expectancy or roll over the deceased spouse’s pension or traditional I.R.A. into his or her own I.R.A.

Other significant changes include required distribution need not begin at 70½ years old but postponed to the age of 72. Also, so long as you have earned income, contributions can occur now at any age.

So, what peace of mind does the SECURE Act give us?

  1. All of us can now work longer and save more in a tax deferred retirement account.
  2. If our children inherit our traditional I.R.A.’s or Pensions, they will now be required to pay income taxes on the amount sooner rather than later.

Robert H. Lugg, a Lock Haven Attorney and “A Resource for the Long-term Care Community” may be contacted at or 570-748-2481.