Lawmakers in Congress are working on a bill to help make
your sunset years a smoother ride.
Reps. Richard Neal, chairman of the ways and means
committee, and Kevin Brady, the committee’s ranking Republican, recently put
forward the Securing a Strong Retirement Act.
This legislation, nicknamed the Secure Act 2.0 — a reference
to a 2019 retirement-reform bill called the Secure Act — aims to offer
Americans more opportunities to increase their retirement savings and improve
their long-term financial well-being.
"The retirement crisis in America is real, and will
only get worse without easier pathways to saving and encouraging workers to
start planning for retirement earlier in life,” the lawmakers said in a joint
statement. Here’s more on what that means for the average worker planning for
retirement at any age.
The original Secure Act (Setting Every Community Up for
Retirement Enhancement) pushed back the age at which retirees must start taking
their required minimum distributions (RMDs) from the 401(k)s and IRAs.
It also expanded the use of 401(k) plans and allowed workers
to contribute to their IRAs longer.
Secure 2.0 would introduce a number of changes that would
make it even easier for workers to save more for their retirement and over a
longer period of time.
The proposed changes include:
Pushing back the age for RMDs from 72 to 75 over the next
Less harsh penalties for failing to withdraw from retirement
accounts on time and more leeway to make catch-up contributions between the
ages of 62 and 64.
Employers will be required to automatically enroll any
eligible employees into a 401(k) or 403(b) plan.
Allowing employers to offer small incentives, like gift
cards, to encourage workers to contribute to their retirement savings.
Allow employers to match retirement contributions to a
worker’s student loan payments.
Create a national lost-and-found retirement plan database to
easily find and collect all your benefits from your career.
More flexible contribution requirements for part-timers and
greater access to plans for employees of small businesses.
Better investment options for 403(b) accounts.
What would the changes mean for you?
As of next year, all employers will be required to
automatically enroll any new employees in a retirement savings plan.
You’ll start out with a 3% contribution, but that should
increase by 1% every year to at least 10%, but no more than 15% of your annual
Workers between the ages of 62 and 64 will be able to
contribute between $5,000 to $10,000 more a year to their SIMPLE or 401(k) and
403(b) plans to help them catch up on savings for retirement.
So if your financial adviser suggests your account needs a
little more padding, this will offer the chance to reach your goals.
As for those who are already retired, they’ll be able to
hold off on taking out their RMDs until 75 years of age — giving them three
more years to watch their savings grow.
Between the incentives and requirements for employers and
the additional opportunities to grow your funds, planning for retirement should
be a no-brainer.
What’s the next step?
After the bill was passed by the ways and means committee in
early May, it was sent to the House of Representatives for consideration. It’s
expected to be taken up by the Senate after the August recess.
Although there’s strong bipartisan support for the
legislation, there’s still a good chance that it’ll face some modifications as
it works its way through Congress.
There’s also another bill, the Retirement Security and Savings
Act, that senators Rob Portman and Ben Cardin recently reintroduced, which
includes many of the same provisions as the Secure Act 2.0.
If that ends up passing in the Senate, it’s likely Congress
would work to reconcile the two bills or ask the Senate to vote on a spending
bill that includes the House’s version of Secure 2.0.
Some form of retirement reform will likely pass this year,
but we presumably won’t know the final details until this summer.
What you can do right now
If your retirement goals and current level of savings are
currently incompatible, you don’t have to just wait for Congress to give you a
Here are some options to help you free up more cash to
funnel away for retirement.
Invest like a pro for only pennies. You don’t have to
have a lot of money to get into the market. WIth a popular app, you can invest
your "spare change” and turn your pennies into a diversified portfolio.
When you’re ready to retire, you’ll have some tidy profits you can rely on.
Crush your debt. If you’re struggling to pay off
multiple debts at high interest rates, consider rolling your debts into one.
Opting for a lower-interest debt consolidation loan is not only an easier way
to chip away at your debt, it’ll also save you some time and money.
Slash your insurance premiums. When was the last time
you looked around for a better price on your auto insurance? If it’s been a
while, it may be costing you more than $1,000 extra every year. Shop around to
ensure you’re paying the best possible rate. And while you’re at it, use the
same technique to save hundreds on health insurance, too.
Click here for the