‍This article was written with the assistance of Sean Claiborne, a Vice President at Wintrust Investments, LLC.  Sean can be reached at sclaiborne@wintrustwealth.com.

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Retirement planning is one of the areas of financial management most overlooked by small business owners. Young entrepreneurs often rationalize that they have too many other pressures. Older entrepreneurs often believe it’s too late to do any meaningful good. However, there are steps both groups, and those in between, can take now to ensure a steady stream of money when they are ready to retire. 

In fact, congress recently passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act which is designed to support Americans in their efforts to save for retirement. SECURE addresses the looming retirement savings crisis being created in part by the shift away from traditional company and government pension plans, called Defined Benefit Plans. These traditional Defined Benefit Plans, in which employers guarantee payouts to employees after they retire, are being phased into Defined Contribution Plans, in which employees save on their own for retirement, often with employers contributing pre-set amounts to their employees’ retirement funds. 

Investopedia, a world-respected web-based source for retirement strategies and investing education, highlights the provisions of SECURE, stating the act strives to meet its objectives by: 

• Making it easier for small businesses to offer their employees 401(k) plans by providing tax credits and protections on collective Multiple Employer Plans (Small businesses can now receive a tax credit of up to $5000 to offset the start-up costs of implementing a retirement plan for their company; if the small business offers automatic enrollment for their employees, then that business may receive an additional tax credit of $500 per year for up to 3 years). 
• Relaxing rules on employers offering annuities through sponsored retirement plans. 
• Expanding access to retirement benefits for long-term, part-time employees.
• Removing maximum age limits for those who have earned income and want to contribute to a traditional IRA, formerly capped at age 70½. 
• Raising the required minimum distribution (RMD) age to 72from 70½. 
• Allowing penalty-free withdrawals up to $5,000 from retirement plans for the birth or adoption of a child. 
• Allowing penalty-free withdrawals of up to $10,000 from 529 education-savings plans for the repayment of certain student loans. 
• Revising components of the Tax Cuts and Jobs Act that raised taxes on benefits received by family members of deceased veterans, as well as students and some Native Americans. 
• And to raise an estimated $15.7 billion to pay for these changes: removing the stretch IRA estate-planning strategy that permits non-spouse beneficiaries of IRAs to spread disbursements from the inherited money over their lifetime. The new limit will be within 10 years of the death of the original account holder. 

SECURE was passed by the U.S. House of Representatives in a 417-3 vote, in July 2019. It passed the Senate as part of the December 19, 2019 spending and tax-extension bills. It was signed into law by President Donald Trump on December 20, 2019. 

Contributions to the right retirement plan can significantly reduce your taxable income. If those retirement plan contributions are invested properly, they can grow into a very sizeable nest egg for you and even your future generations. 

How do you make the most of the benefits that the SECURE Act can provide your business and employees? Whether your business is big or small, you should consult a Certified Public Accountant (CPA) who specializes in tax planning (not just tax preparation). The job of the CPA is to help you uncover what types of retirement plans make the most sense for you and your small business.  The CPA also leverages the tax laws to help you and your small business protect more of your profits and earnings from taxation.  The next step is to seek a quality (not just qualified) licensed financial advisor who will establish the retirement plan for you and your business based on the recommendations that your CPA provides. 

This information may answer some questions, but is not intended to be a comprehensive analysis of the topic. In addition, such information should not be relied upon as the only source of information, competent tax and legal advice should always be obtained. 

For in-depth analyses of the SECURE provisions impacting small business owners and employees, as well as regular updates and consulting on Retirement Funding for Small Business Owners and Employees, visit Minority Entrepreneur News Online: mwdbenews.com 

For a detailed account of the SECURE House Bill go to:

https://www.congress.gov/bill/116th-congress/house-bill/1994

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