In the early fall 2021 the Retirement Industry could see some major overhauls. Recently, a bill was introduced (the Retirement Security & Savings Act) with bipartisan support and as a result there is a reason to be optimistic about some exciting changes. This bill is sometimes called The Secure Act 2.0.
Many are prepared to retire but for those with less education there is a crisis in America regarding the ability to retire above the poverty line. According to the Rand Corporation, overall 71 percent of Americans are adequately prepared for retirement: 80 percent of married persons and 55 percent of single persons. Those with low education are much less adequately prepared than those with higher levels of education, especially single women. This bill will make a big difference for these people.
We’re looking at more sweeping change than the industry has seen in a long time. This Bill features more than 50 proposals for improving coverage with small employers and part-time workers.
Under current law, retirement savers must begin taking distributions from their retirement plans at age 72, an increase created by the Secure Act. Secure 2.0 increases the RMD age further to 73 starting on Jan. 1, 2022; to 74 starting on Jan. 1, 2029; and 75 starting on Jan. 1, 2032.
Some features of the Retirement Security and Savings Act:
- Expands Auto-Enrollment in Retirement Plans
- Higher Catch-Up Limits at age 62, 63 and 64
- Indexes IRA Catch-Up Limit
- Boosts Small Employer Pension Plan Startup Credit
Among other key changes, SECURE Act 2.0 also would:
- Create a national database for Americans to find lost retirement accounts.
- Expand self-correction opportunities, including for participant loan errors and employee elective deferral failures.
- Require the Treasury Secretary to take steps to increase public awareness of the Retirement Savings Contributions Credit (also known as the saver’s credit), available to low-and moderate-income workers.
- Extend to 403(b) retirement plans some of the design features of 401(k) plans.
- Eliminate certain barriers to offering lifetime income annuities as a retirement plan investment option.
While there are many proposals designed to help the saver, according to T. Lake Moore V of McAfee & Taft, the proposal also contains a number of important revenue-raising changes (i.e. changes accelerating the taxation of retirement benefits).
Watch this blog for updates to the wide sweeping changes this bill sets out. Want to self-direct your retirement? Get started HERE.