April 27, 2022

Congress wants to help more Americans save for retirement with the Secure Act 2.0

BY JULIA ANDERSON
Later this year, Congress likely will pass the Secure Act 2.0 in an attempt to get more Americans saving for retirement. At the same time the bill gives retirees more time to take money out.

This is a big deal because only 50 percent of American households use a retirement account. That is unchanged in the past 20 years. Even more depressing is that heads of households between ages 35 and 44 are actually LESS likely now to own a retirement account than 20 years ago.
 
The bill basics:
If passed later this year out of the Senate, the Secure Act 2.0 would expand enrollment in tax-deferred retirement accounts by offering a tax credit up to $500 to enrollees who elect to enroll in an auto-enrollment retirement savings program. The tax credit applies the first three years of participation.
 
More employers will be required to AUTOMATICALLY enroll new employees in a retirement savings plan with a 3 percent payroll deduction level that ticks up annually until it reaches 10 percent. Employees must opt out of the plan, rather than opt in. It also allows part-time workers to participate in a 401(k) plan. That would benefit many women who juggle family and a part-time job.
 
If passed, the bill would raise catch-up contribution limits for people 62, 63 and 64: The contribution limit goes from $6,500 a year to $10,000 a year for this age group. But the additional contributions must be in after-tax Roth IRA contributions.
 
The bill improves and simplifies a SAVER’S TAX CREDIT for medium and low-income households starting in 2027. This provision increases the number of people who qualify to save in an employers’ retirement account.
 
For those near retirement, the bill again raises the age when people would be required to start withdrawing money from their retirement accounts from a current age 72 to 75 by 2033.
 
Small businesses would receive more incentives for launching retirement plans. Student borrowers would get extra assistance with loans.
 
EXAMPLE: According to Forbes magazine: A married couple earning $50,000 a year and saving $4,000 annually in a retirement account would get a $400 tax credit in addition to matching money from an employer and a tax deduction on their federal taxes for the money saved.
 
OUTLOOK: Secure Act 2.0 is expected to be taken up in the U.S. Senate after the August 2022 recess and then become part of a larger end-of-year spending bill or it could remain a stand-alone bill and pass on its own.

NEGATIVES of this bill: Critics say this bill does not do enough: It doesn’t tackle why more Americans are doing nothing to save for retirement. Some see a universal coverage plan as a better solution. Something like a Social Security account for long-term savings rather than leaving it to individual employers to find account managers and set up programs. 
Meanwhile, workers can go long stretches without having access to a retirement savings plan because they lose a job, or work for an employer without a retirement plan. Also people switch jobs and take out their money. Money leaking out of existing retirement accounts is a problem. The bill does nothing to address that.

My summary touches the surface of the reform bill. For more:
Kiplinger, click here.
Forbes, click here.
WSJ "How to get Americans to Save for Retirement" - click here.
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My 2022 Smart Women Smart Money interview with Helen Raptis at KATU's AM Northwest

​"It is never too late to start managing your money,"         Julia Anderson, author, journalist and television host. 

​A big thank you to Helen Raptis, host of AM Northwest at Portland’s KATU Channel 2 for profiling me and my newly updated 2022 book, “Smart Women Smart Money Smart Life.” Helen is such a good interviewer and gets right to the heart of things:
 
- Mistakes women make when planning (or not planning) for retirement.
 
- Lessons we learned from Covid-19 (a whole chapter in my 2022 book).
 
- Mistakes I made with my own money over my work life.
 
- Why women were hit hard by Covid-19 layoffs and shutdowns.

 Here’s a link to the interview:
 https://katu.com/amnw/am-northwest-books-authors/smart-women-smart-money-smart-life-03-01-2022
 
Thanks again to the crew at KATU's AM Northwest for arranging this interview.
JULIA ​