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Secure Act 2.0

MoneyWise

Christian talk radio with Rob West

May 25, 2021

Remember the SECURE Act that President Trump signed into law in 2019? It made it easier for Americans to save for retirement. Now, Congress is preparing to upgrade that legislation. They’re calling it the SECURE Act 2.0 and lawmakers are saying it will make it easier for the American family to prepare for a financially secure retirement. We’ll talk about that first, today. This new legislation is officially called the Securing a Strong Retirement Act of 2021. It’s already been approved by the House Ways and Means committee and the full House is expected to vote on it soon. Now, normally, we wouldn’t report on pending legislation. But the SECURE ACT 2.0 has broad, bipartisan support in both the House and the Senate and stands a good chance of landing on President Biden’s desk later this year where he’ll likely sign it. Retirement advocacy groups and the financial services industry also appear to favor the new bill. So what does it mean for you and how might it change the way you save for retirement? It would allow you more time to salt away contributions to your 401(k) or traditional IRA before you have to start taking Required Minimum Distributions and pay taxes on those withdrawals. The original SECURE Act raised the age for RMD's from 70 to 72. That was considered a major improvement. Now, the SECURE Act 2.0 would raise the age for RMD's from 72 to 75. That would be extremely helpful because Americans are living longer and the change would give more flexibility to build up a bigger nest egg before having to make withdrawals. And here’s another key feature. The bill would exempt retirees from taking RMD for life, if the sum of all their retirement account balances is less than $100,000 when they reach age 75. And that may not be the end of it. There may be growing support on Capitol Hill to get rid of required minimum distributions completely! But don’t look for that in this legislation. Another key provision would push employers to make enrollment in retirement plans the default position for new workers. They’d be automatically enrolled, but could opt out if desired. Right now, employers aren’t required to implement automatic enrollment. But research shows that those that do have higher rates of participation in retirement plans. Many countries, such as the U.K., Australia, and Israel, have mandatory retirement savings programs. Lawmakers say that automatic enrollment would get millions more workers starting to save for retirement at an earlier age, which is key for allowing investments time to grow. SECURE Act 2.0 would help workers pay off student loans while still saving for retirement. It would enable workers to pay back their loans instead of contributing to their retirement plan. But they could still receive employer contributions. In other words, get a so-called matching contribution without putting anything into a retirement account. Imagine that! This legislation would give additional tax breaks to low-income workers who save for retirement under the SAVERS credit and would peg that credit to inflation. The bill would also create a national database for lost retirement accounts. Yes, retirement accounts do get lost, tens of thousands of them. It happens when workers move from one company to another, and then another, and eventually lose track of money they’ve left behind. Currently, workers, age 50 and up, have special catch up provisions for contributing to their retirement plans. The bill would increase those amounts and tie them to inflation. If SECURE Act 2.0 is signed into law (as expected), it could help a lot more people save more for retirement. On today’s program we also answer your questions: --I’ll be a first-time homebuyer soon; I’m young. However, house prices are a little higher right now. Should I buy now or wait until later? --Should I refinance my mortgage or should I pay additional money towards it? Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected] Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, purchase books, and even download free, helpful resources like the free MoneyWise app. Like and Follow us on Facebook at MoneyWise Media for videos and the very latest discussion! Remember that it’s your prayerful and financial support that keeps MoneyWise on the air. Help us continue this outreach by clicking the Donate tab on our website or in our app.

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