Boosting your retirement savings is the main objective behind a federal law signed by President Trump in December 2019. The Setting Every Community Up for Retirement Enhancement (SECURE) Act relates mostly to IRAs and employer-sponsored 401(k), 403(b) and 457 retirement savings plans, but 529 education savings plans are also impacted.

Unless otherwise noted, the changes identified below took effect January 1, 2020.

You’re no longer required to take distributions at age 70½

Before this year, once you reached 70½, the IRS generally required you to start withdrawing at least a certain amount of money — a “required minimum distribution” (RMD) — out of your employer-sponsored plan and traditional (non-Roth) IRA each year. With people living longer, the SECURE Act raised the age at which RMDs must begin from 70½ to 72. This change applies to anyone who turns 70½ after December 31, 2019.

A Roth IRA remains exempt from RMD rules. You can leave your money in a Roth IRA for as long as you like.

You can now contribute to a traditional IRA with no age limit

It used to be that you couldn’t contribute to a traditional IRA after age 70½. The SECURE Act repealed this restriction. You can now contribute to a traditional IRA for as long as you like, provided you have what the IRS considers “earned income” (generally wages, salaries, bonuses, commissions, tips and net earnings from self-employment).

Employer-sponsored plans and Roth IRAs remain free of age restrictions on your contributions.

You can generally withdraw funds penalty-free for the birth or adoption of a child

You can withdraw up to $5,000 from your employer-sponsored plan or IRA within a year after the birth or adoption of a child without having to pay the usual 10% penalty for early withdrawal. If you’re married, you and your spouse can each withdraw $5,000 from your respective accounts, penalty-free.

These withdrawals will still trigger regular income tax, so be sure you can afford the tax before deciding to dip into your retirement savings.

There’s a change in the impact of naming a non-spouse beneficiary for your IRA

Before the SECURE Act, when an IRA owner died and the account’s assets went to a beneficiary other than the owner’s spouse, the beneficiary could stretch withdrawals from these assets — and therefore defer taxes on the assets — over their lifetime. Under the Act, for deaths that occur after December 31, 2019, the non-spouse beneficiary must generally withdraw assets (and pay taxes on them) within 10 years.

There are exceptions to this rule. For example, if the beneficiary is the account owner’s minor child, the 10-year clock doesn’t start ticking until the child reaches the “age of majority” (the age at which a young person becomes an adult according to state law). Also, a chronically ill individual or a beneficiary who is no more than 10 years younger than the account owner is exempt from the 10-year time limit on withdrawals.

More part-time workers can now contribute to an employer-sponsored retirement savings plan

In the past, employers could exclude part-time employees from eligibility to participate in workplace retirement savings plans. Starting in 2021, the SECURE Act will guarantee such eligibility for employees who work either 1,000 hours throughout the year or have worked at least 500 hours a year for three consecutive years. The new rule does not apply to collectively bargained plans.

You can now use 529 plan money to repay student loans

The SECURE Act lets you withdraw from a 529 plan up to $10,000 free of federal income tax to repay qualified student loans. This change may benefit you especially if you have leftover funds in your 529 plan account after the plan beneficiary graduates.

The $10,000 is a lifetime limit that applies to the plan beneficiary as well as to each of their siblings. For example, if you have two children, you can withdraw up to $10,000 for each child, for a total of $20,000.

Be aware that any student loan interest paid for with tax-free 529 plan dollars is not eligible for the federal student loan interest deduction. Also, depending on where you live, your withdrawal of 529 plan funds to pay down student debt may be subject to state income tax.

Your Ernst & Young LLP (EY) financial planner can walk you through these and other changes brought about by the SECURE Act.

This material is provided solely for educational purposes; it does not take into account any specific individual facts and circumstances. It is not intended, and should not be relied upon, as tax, accounting, or legal advice.