A FEW retirement proposals to help Americans save for their older years are currently in the works in Congress.
A bill known as Secure Act 2.0, or the Securing a Strong Retirement Act, passed the House Ways & Means Committee in early May.
However, not much has happened since then, which is likely due to the current “packed congressional calendar”, according to investment firm Nuveen.
Yet it doesn’t mean the bill won’t come into effect.
At the time of approval, the committee chairman Richard Neal and ranking member Kevin Brady, said: “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.
““This legislation expands automatic enrollment, simplifies many retirement plan rules, and strengthens small businesses’ ability to offer workplace retirement plans, to make it easier for Americans to plan for their golden years.
“We are now one step closer to improving Americans’ financial security, and hope to see this measure move through Congress and be signed into law in short order.”
Under Secure 2.0, it could become mandatory for employers to enroll their workers in 401k accounts.
At the moment, bosses have the option to but they’re not required to by law.
A 401k allows you to dedicate a percentage of your pre-tax salary to a retirement account, and this is sometimes matched by your employer.
The Secure 2.0 move is an aim to nudge more households to save for their retirement, although they’ll still have the option to opt out.
The auto-enrollment provision would start by having employees save 3% of their paychecks, raising that by 1% each year until hitting 10%.
Support for those with student debt
Another measure of the bill would encourage employers to contribute matching funds to workers who can’t afford to save for retirement due to student loans.
For example, employers could match a portion of a worker’s student loan payments and deposit that in the person’s retirement account.
This applies for people who aren’t saving on their own too.
The suggestion is an aim to help those who may not be able to save for retirement because they’re overwhelmed with student debt.
Higher catch-up contributions
Next up, the bill would allow older workers to contribute more to their retirement savings compared to current levels.
Most employees can currently put in $19,500 a year of their own money in a 401k account, excluding employer contributions.
However, workers who are older than 50 years old are eligible for an extra catch-up contribution of $6,500 in 2020 and 2021.
Under the proposal, individuals in their early 60s would be able to invest an extra $10,000 each year into 401k accounts and certain other plans.
Saver’s credit boost
Secure 2.0 would also direct the IRS to promote the saver’s credit to make sure more households take advantage of it.
Also known as the retirement savings contributions credit, it’s given to low-income workers who save money into a retirement account
The tax credit is currently worth up to $1,000 for qualifying individuals, or up to $2,000 for married couples filing jointly.
Individuals may receive a credit of 10%, 20% or 50%, depending on income, of what they contribute to a retirement plan.
However, the use of the credit is low with millions of households estimated to miss out.
Meanwhile, a separate proposal, known as the Encouraging Americans to Save Act, would make the credit refundable.
This would mean that households can get as a refund if they owe little or no federal tax.
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