Lawmakers Actually Agree These 3 Retirement Savings Changes Should Be Made

Dec 4, 2020 / Amanda Chase, Horsesmouth Assistant Editor

Judging by their retirement account balances, Americans need more help saving for retirement. And there’s a chance they may actually get it soon from Washington, D.C. That’s because the Securing a Strong Retirement Act of 2020 is bipartisan legislation introduced recently by House Ways and Means Committee Chairman Richard Neal (D-Mass.) and Ranking Member Kevin Brady (R-Tex.). With bipartisan support, the bill actually stands a chance of becoming law. If it does, here are three big changes that could affect your client’s retirement plans.

  1. Automatic 401(k) enrollment. Under the law, workers would be automatically enrolled in a 401(k), 403(b), or SIMPLE workplace plan as soon as they became eligible. While workers could choose to fill out paperwork to opt out, enrollment would become the default. Employers would have the option to set automatic contributions at 3% to 10% of pay by default.
  2. Expanded tax credits. Currently, a saver’s credit provides a tax credit worth between 10% and 50% of the first $2,000 you contribute to a retirement account, with the exact percent depending on your income. The Securing a Strong Retirement Act would expand and simplify this credit. It would be available up to a higher income tier, and anyone who is eligible would receive a credit valued at 50% of their contributions rather than receiving a tiered credit based on income. The maximum amount of the credit would also increase.
  3. Higher contribution limits. Currently, those who are 50 or older are allowed to contribute an extra $6,500 to their 401(k) in 2020, while those with a SIMPLE plan can contribute an extra $3,000. These are on top of the standard contribution. The new bill would provide people who reach the age of 60 with a chance to invest even more with pre-tax dollars. Anyone 60 or older would be eligible to make catch-up contributions of up to $10,000 for a 401(k) and $5,000 for a SIMPLE account. These limits would be indexed to inflation as well.
  4. You can find the full article at The Motley Fool.

 

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