The massive spending package that Congress is poised to pass before Friday includes tangible changes for ordinary Americans when it comes to retirement savings—particularly 401(k) savings. Some of the proposed changes as part of the Secure Act 2.0 legislation:
- Automatic: Most employers would be required to automatically enroll workers in 401(k) plans by the end of 2024, per CNN. Employees could opt out if they choose. The default contribution rate would be at least 3% of income but not more than 10%.
- Government match: For workers who earn less than $71,000, the government would provide a 50% match for up to $2,000 in contributions. That would mean an extra $1,000 from the government, which may not seem like a huge deal in a given year, but "if you start (contributing) early, then the impact of compounding interest can be significant," Lisa Featherngill of Comerica Bank tells CBS News.
- Bigger catch-up: People on the brink of retirement could increase their annual "catch-up" allotments to $10,000 per year, up from the current maximum of $6,500, per CBS.
- Age change: Current law requires people to begin withdrawing from their accounts at age 72, but the new law would increase it to 73 in 2023 and to 75 in 2033, per the Washington Post.
- Student debt: A tweak could provide a savings boost for people strapped with student loan debt. Currently, if such people don't contribute to a 401(k), they miss out on an employer's matching contributions. Under the new law, employers "could choose to make contributions to retirement accounts based on an employee’s student loan payments," per the Post.
See
CBS,
CNN, or the
Post for full details of these and other modifications under the proposed law. (More
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