Congress is taking action to help avoid a potential retirement crisis. A bill expected to reach President Joe Biden’s desk later this year could bring about new rules involving 401k programs. How those changes could impact your retirement savings.
Your retirement savings may be about to face a major and inevitable change! Lawmakers in Washington are working on a bill that could transform your 401k.
The legislation Secure Act 2.0 is expected to reach President Joe Biden’s desk by the end of the year. If passed and signed, it could require most employer-sponsored retirement plans to enroll eligible workers automatically at a 3 percent level.
That would increase by 1 percent until you’re contributing 10 percent of your paycheck annually, but workers would have the option to opt-out or change their contribution level
“Most people do not understand something called the pay yourself first rule. And that means put money in your retirement plan before you start spending money on things like entertainment and travel,” said Jenkin.
The plan would also delay mandatory withdrawals and limit penalties for those who fail to withdraw on time.
The Proposed Act could also make it easier for those with student loans to save, and for older workers to make catch-up contributions. It’s also a major change for part-time workers, who would be able to contribute to 401k plans for the first time.
With pension plans nearly extinct, and the social security trust fund facing a 75-year deficit. Experts say 401k plans are more critical than ever.
“The three-legged stool of retirement has basically turned into a pogo stick and it’s going to be on your back and your responsibility to save money,” Jenkin said.
The plan would also extend tax credits to small businesses for providing greater access to retirement plans for their workers and it would create an online database for Americans to locate lost retirement funds.
