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Retirement Bill Would Help Savers of All Ages

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Americans may soon enjoy greater access to retirement plans and could be able to delay withdrawing their savings, thanks to legislation advancing through Congress.

The Securing a Strong Retirement Act passed the U.S. House of Representatives on Tuesday by a vote of 414-5.

If it becomes law as currently written, the bill would build upon the changes to retirement law that began taking effect in 2020 under the Setting Every Community Up for Retirement Enhancement Act of 2019, also known as the Secure Act.

Specifically, the new bill — which is often referred to as Secure Act 2.0 — would accomplish the following major changes.

These changes — and many others in the bill — would help millions of workers, ranging from recent college graduates who don’t know where to start preparing for retirement to those older workers who are closest to the goal line. It would also help retirees hold on to more of their retirement savings for longer.

1. Expand automatic enrollment in 401(k) and 403(b) plans

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With some exceptions, new employees who become eligible to contribute to these types of workplace retirement plans would be automatically enrolled in them.

Their initial automatic contribution would be 3% to 10% of their pay, and would increase by 1 percentage point each year until it reaches at least 10%, unless a worker changes the percentage or opts out of contributing altogether.

When: If the Securing a Strong Retirement Act becomes law as currently written, this provision would take effect starting with the 2024 plan year.

2. Raise the age for mandatory withdrawals

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The Secure Act of 2019 raised the threshold at which people generally must start taking required minimum distributions (RMDs) from their retirement accounts to the year in which they turn age 72, up from 70½.

The Securing a Strong Retirement Act would further raise that age to 73 starting Jan. 1, 2023, then to 74 starting in 2030, and finally to 75 in 2033.

When: This provision would apply to withdrawals required to be made in 2023 or later.

3. Index the IRA catch-up contribution limit for inflation

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Currently, people age 50 and older can make an extra $1,000 in individual retirement account (IRA) contributions, known as “catch-up contributions,” each year. That $1,000 amount is not indexed for inflation, meaning it does not increase when inflation rises.

The Securing a Strong Retirement Act would index that amount, allowing it to keep pace with inflation.

When: This provision would take effect starting with the 2024 tax year, the one for which your return is due by April 2025.

4. Increase catch-up contribution limits for some employees

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This change would add opportunities to save for employees ages 62-64 who have workplace retirement plans, raising their catch-up contribution limit to $10,000 for most types of workplace retirement plans and to $5,000 for SIMPLE plans.

Those amounts would also be indexed to keep pace with inflation.

When: This provision would take effect starting with the 2024 tax year.

5. Enable matching retirement contributions for student loan payments

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The Securing a Strong Retirement Act would allow employers to “match” a worker’s student loan payments by making equivalent contributions to the worker’s retirement plan. For example, if you make a $100 student loan payment, your employer could make a $100 contribution to your 401(k).

According to the official bill summary, this provision “is intended to assist employees who may not be able to save for retirement because they are overwhelmed with student debt, and thus are missing out on available matching contributions from their retirement plans.”

When: This provision would take effect starting with the 2023 plan year.

6. Reduce RMD penalties

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As we explain in “3 Tax Penalties That Can Ding Your Retirement Accounts,” current law harshly penalizes those who fail to take their required minimum distributions from retirement accounts on time: The amount of the fine is equivalent to 50% of the amount of the RMD they did not take on time.

The Securing a Strong Retirement Act would reduce the penalty to 25% and provide the opportunity to further soften the penalty to 10% by quickly correcting the mistake and withdrawing the full required amount.

When: This provision would take effect starting with the 2023 plan year.

7. Create a retirement lost-and-found

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The Securing a Strong Retirement Act would require the U.S. Department of Labor to create a national database for Americans’ retirement plans that is online and searchable.

This retirement savings lost-and-found, as the bill describes it, would enable people who have lost track of a pension or 401(k) to search for the contact information of the plan administrator.

When: This provision generally requires that the database be created within two years of when the Securing a Strong Retirement Act is signed into law.

What happens next?

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Before it can become law, the Securing a Strong Retirement Act will still need to pass the U.S. Senate and receive the president’s signature.

To let your senators know how you feel about the legislation, contact them.

To learn more about the bill, check out the latest full text or summary.

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