A proposed bill includes a number of retirement reform measures, including a few notable changes that would encourage people to start saving earlier – and allow their savings to grow uninterrupted over a longer period of time.
Savings have taken on a new focus in light of the coronavirus pandemic, which brought on a deep recession and affected financial situations for households throughout the U.S.
For example, about 58% of people whose job was impacted said they don’t know if they have enough saved to retire.
Here’s a look at several key provisions included in the newly-introduced bill, known as the Securing a Strong Retirement Act of 2020:
Raise the age for RMDs
Individuals with IRAs, 401(k)s and other types of tax-advantaged savings accounts are required to take out specific amounts each year after they reach a certain age, known as required minimum distributions (RMDs).
The amount an individual is expected to withdraw will depend on their specific financial situation.
The legislation aims to increase the age that RMDs begin to 75, which would allow savings to grow untouched for a longer period of time.
The government just raised the required minimum distribution age to 72, from 70.5, effective for those who reached 70.5 after Dec. 31, 2019.
The CARES Act eliminated RMDs for 2020.
Another benefit for older Americans would be to increase the catch-up contribution limit for those aged 60 and over to $10,000.
Expand automatic enrollment
As a means to help more workers start saving earlier, the bill would expand automatic enrollment options. That means more workers would be automatically signed up for their company’s 401(k) plan.
The bill also contains more incentives for small businesses to offer plans to employees.
Options to pay off student debt
An innovative measure included in the legislation is a way to help students pay off student loan debt while still saving for retirement.
This option would treat certain qualifying education payments as though they were contributions being made to a company 401(k) account, meaning the employer would put matching funds into the savings stash even though the worker was using their portion to pay off debt.