New Bill in Congress Could Help Build Your Savings in Retirement personal Finance

(Katie Brockman)

The US House of Representatives recently passed a new retirement bill called SECURE 2.0, which is designed to build on the SECURE Act of 2019.

SECURE 2.0 aims to make retirement preparation easier for workers, and there are three big changes that can help push your savings even further. While the new bill is still under review in the Senate and is not yet law, here’s what to expect if it is passed.

Image Source: Getty Images.

1. Increased RMD Age

If you’re saving in a 401(k) or traditional IRA, you need to start making required minimum distribution (RMD) once you turn 72 – whether or not you are ready to retire at that age.

People are reading…

  • The owner of a Winston-Salem store suffered a scuffle with a customer. Incident sheds light on treatment of black shoppers, says local group
  • Combination barbecue-seafood restaurant opens in South Stratford
  • Obscene political message flashes on Winston-Salem road sign, but no word yet on how it happened
  • Bulls Tavern will close after 10 years in downtown Winston-Salem.
  • Soccer star Hope Solo guilty of DWI. Officials say she was found dead in a Walmart parking lot in Winston-Salem.
  • Woman’s body found in Winston-Salem Creek
  • Ask Amy: The Kid On Board Inspired the Family to Get Down
  • New Brewery in Winston-Salem Inspired by German, Czech Traditions
  • Two cars damaged, shots fired in the parking lot of McDonald’s Haines Mall
  • Man recovering after overnight drive-by shooting in Winston-Salem, police say
  • Hate Winston calls for boycott of Ego beauty supply store in Winston-Salem; The group protested on Saturday
  • Check Your Tickets: Here Are Tonight’s Mega Millions Numbers
  • Winston-Salem Police Say Arcade Owner, Shot 4 Times, Robbers Stopped
  • Ardmore neighborhood understands life without a post office once again
  • Former FCDS and Wake Forest track coach Noel Rubel has died aged 65

That’s because you have to pay income tax on your withdrawals, and Uncle Sam eventually wants that money. RMDs ensure that you are not leaving your savings in your retirement fund indefinitely. The original SECURE Act raised the age that you must start taking RMDs from 70 1/2 to 72, and SECURE 2.0 proposed raising it again to age 75 by 2032.

If you plan to continue working well into your 70s, it can help your money last longer. Right now, you have to start withdrawals at age 72, even if you don’t need that money. Under the new bill, however, you can leave your savings in your retirement account longer, giving that money more time to grow.

2. Student Loan Benefits

SECURE 2.0 aims to help people with student loans save more for retirement. As more older Americans take out student loan debt, this bill could potentially help workers of all ages save more.

There is a proposal within the bill 401(k) Contribution Matching from employers. For every dollar an employee pays toward eligible student loans, the employer can match those contributions. So, for example, if you paid $200 towards your loans, your employer can contribute up to $200 to your 401(k).

The proposal is intended to help workers avoid choosing one of these pay off debt and saving for retirement. Many 401(k) plans already offer employer matching contributions, and this bill will ensure that workers paying student loan debt won’t have to miss out on those benefits.

3. High Catch-up Contribution

Under current law, people age 50 and older are eligible to contribute more to their retirement accounts than younger workers. Right now, these catch-up contributions are limited to $6,500 per year for 401(k)s and $1,000 per year for IRAs.

SECURE 2.0 proposes a higher limit of $10,000 per year for those aged 62 to 65. If you are lagging behind in your savings and are able to take advantage of these catch-up contributions, this higher limit can go a long way. Towards building a strong nest egg.

Again, SECURE 2.0 has only just passed in the House of Representatives, and it is likely that the Senate will come up with its own draft of the bill before anything is passed. But by staying updated on the latest retirement laws, you can ensure that you’re maximizing your savings and going into your senior years for as long as possible.

The $18,984 Social Security Bonus Most Retirees Completely Overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a few little-known “Social Security secrets” can help ensure an increase in your retirement income. For example: A simple trick could end up paying you as much as $18,984 every year…! Once you learn how to maximize your Social Security benefits, we think you can retire confidently with peace of mind. To learn more about these strategies just click here,

The Motley Fool has one Disclosure Policy,

Be the first to comment

Leave a Reply

Your email address will not be published.