The latest bipartisan retirement bill proposed by the House on Tuesday has a lot of perks. The biggest is changing the age at which people must start withdrawing money from their 401(k) from 72 to 75. Called the Securing a Strong Retirement Act of 2020, the bill aims to ensure Americans can successfully save for retirement while still improving their long-term financial standing.
Other changes included in the bill:
- Allow workers paying off student loan debt to get a company 401(k) match.
- Require 401(k), 403(b) and SIMPLE plans to enroll workers automatically.
- Allowing people with less than $ 100,000 in their IRA and 401(k) savings to pass on taking distributions.
- Create greater incentives for small businesses to include retirement plans.
- Designing a national online 401(k) system to help people locate past accounts they lost track of.
Seniors will be able to hold onto savings longer
Ultimately the bill aims to give seniors more flexibility with their savings and protect their retirement accounts. The previous Secure Act passed in December of 2019 already raised the RMD age from 70.5 to 72; the additional bump to 75 could benefit more retirees.
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The required withdrawals are intended to ensure that retirees use the money they save during their lifetime and not allow these funds to turn into money that’s transferred to beneficiaries after death. Those who do not take the required money out do face serious tax penalties. Being able to keep money in the accounts for longer will allow seniors to build up their savings and have more control over their assets.
New territory for student loan borrowers
Many people who are struggling with student loan debt aren’t able to adequately save for their retirement and miss out on the benefits that come with employer matching contributions. The proposed bill would change things.
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Businesses would match contributions for a 401(k), 403(b) plan or a SIMPLE IRA for employees with student loans, regardless of whether the employee is in the company retirement plan. Payments for loans would essentially serve as a deferral for the contributions they would have to make for matching contributions. Student loan borrowers would no longer have to choose between making their loan payment or contributing to their retirement.
Too long, didn’t read?
Most people are willing to acknowledge there are a lot of problems with the U.S. retirement system. While the bill doesn’t solve some of the biggest issues facing retirees –– rising healthcare costs and sustaining the Social Security Trust fund –– it is a step in the right direction. It’s unlikely the bill will pass after the election and maybe not until the end of the pandemic, so we’ll have to wait to see what impact this bill has.
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