Women are undeniably in a worse position than men when it comes to retirement security. While the SECURE Act does nothing to lower the distribution amount for women vs. men, it does have a multitude of benefits you may not yet realize.
What is the SECURE Act?
The Setting Every Community Up for Retirement Enhancement Act of 2019, better known as the SECURE Act, which originally passed the House in July, was approved by the Senate on Dec.19, 2019, as part of an end-of-year appropriations act and accompanying tax measure, and signed into law on Dec. 20 by President Donald Trump. The far-reaching bill includes significant provisions aimed at increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets.
Why Women Have it Harder
Although saving for the future is a challenge for millions of workers, there’s one group of people in particular who are facing greater retirement risks: Women.
Women often lag significantly behind their male counterparts in preparing for retirement as the typical retirement income for women age 65 and older is 25% lower than that for men; women are also 80% more likely to face poverty in retirement. Women make up the majority of low-wage and part-time workers and accordingly are less likely than others to participate in a workplace retirement plan. What’s more, women face a pay gap during their career and are more likely to leave the workforce to become caregivers: both of which have a long-term impact in terms of lost wages and Social Security benefits.
How the SECURE Act Benefits Women
The SECURE Act takes steps to extend critical protections to women’s retirement security and provides enhanced tools to ensure women can better prepare for retirement. According to Campbell Wealth Manager Evan T. Beach for Kiplinger, the key ways this Act benefits women includes:
- ‘Delaying RMDs: While the SECURE Act does nothing to lower the distribution amount for women vs. men, it does push the distribution age back. This has obvious benefits if you live a longer life, but also benefits those with IRA savings who decide to work past age 70. The “still-working exception” allows you to postpone distributions from your current employers’ retirement plan, but not from your IRAs. Anyone born on July 1, 1949, or later will now be required to start taking distributions at age 72, not 70½.
- Greater access to lifetime income annuities: In the purest sense of the word, an annuity is a lifetime income stream. Annuities are issued by insurance companies but have rarely been an investment option within workplace retirement plans … until now. The various insurance lobbies were fully behind the SECURE Act legislation because it reduces the fiduciary liability associated with annuities within workplace retirement plans. As a result, you will start to see more annuities offered on your 401(k) list.
- Expanded access to retirement benefits because of changes to the 1,000-hour rule: Women have long been plagued by something called the 1,000-hour rule. Essentially, if you work less than 1,000 hours in one calendar year (19.2 hours per week), your employer is not required to offer you a workplace retirement plan. The SECURE Act says that if you work 1,000 hours or more in one year OR if you worked at least 500 hours in each of three consecutive years, the employer can no longer exclude you.
- Removal of the age limit on IRA contributions: For no obvious reason, the traditional IRA was the only retirement plan with an age restriction on contributions. The SECURE Act eliminates that age limitation and creates a way for those still working in their 70s to save in a tax-advantaged vehicle. So why does this matter for women? One of the best things women can do to combat the disadvantages of fewer years in the workforce and less pay, is to work longer. Besides the obvious benefit of fewer years of depending on your savings for income, it allows your money to accumulate longer and will increase your Social Security benefits.’
Evan continues, “The primary intention of the SECURE Act was not to level the playing field for women in the retirement arena. That said, there are some definite wins for women in this legislation that should not be ignored.”
Who We Serve: Women
Multiple studies have found that the financial-services industry has failed to engage its female clients, or even understand them. Meanwhile, many women have failed to seek, or follow, professional financial advice.
CKS Summit Group has a unique focus on retirement planning for women. No matter what stage of the planning process you’re in, we are committed to empowering you through service, education, and thoughtful advice.
For more information on CKS Summit Group and how the SECURE Act affects you, contact us here today.