Congress wants to change how you save for retirement — here’s how
A number of reforms in the mammoth legislation could change how Americans save for retirement. Omnibus spending bill worth $1.7 trillion Legislators are racing to pass legislation before Friday.
The spending bill, which has more than 4,000 pages is designed to fund federal agencies through September 2023. However, it also covers everything from emergency situations to general funding. Assistance for Ukraine America’s retirement gap. This is due to a retirement bill. This year, it was earlier The Secure 2.0 bill was a bill that received broad bipartisan support in the House. It was then wrapped into the omnibus spending bill.
Nearly half of older workers are affected by these changesYou don’t have any retirement savingsMany people who are saving money for their golden years are far away from their goals. Americans believe that they need to save money. $1.25 Million The average retirement account has less than $87,000 to allow you to retire comfortably.
“The fact that this bill encourages savings for retirement and will help those individuals may not be able to put the money aside is really positive,” Lisa Featherngill (national director of wealth planning at Comerica Bank), told CBS MoneyWatch.
These are some of the major changes that are in store for American retirement savers.
Student loan repayments may be matched by employers
Employers may consider student loan repayments of their employees as elective deferrals to retirement accounts. This would allow them to match their 401(k) contributions. This would be a benefit to workers who are not saving enough for retirement due to their college debt.
Featherngill stated that this means that up to a point, the loan payments will be counted as if you had put the money in the retirement plan.
She predicted that this will allow younger workers who are struggling to repay their loans to begin saving for retirement earlier.
A $2,000 retirement match
The bill would also expand and make the Saver’s Credit non-refundable by making it a direct federal contribution to retirement funds owned by low- or middle-income workers.
The plan allows workers to receive a $2,000 match from government if they earn less than a certain income threshold and make contributions to a retirement plan. For single filers, the income limit is $35,500 and for married taxpayers it’s $71,000.
Experts say that while this may seem like a small benefit it could have a significant impact over time. Featherngill stated that compounding interest is a significant benefit for those with lower incomes who don’t save enough for retirement.
Retirement of mandatory funds delayed until age 75
The bill would also amend the law regarding required minimum distributions (or RMDs), which is the amount that retirees are required to withdraw each year.
Currently, people must start taking their RMDs when they turn 72. However, the bill would raise that age to 73 in January 2023 and then to 75 in 2033.
This would allow older Americans to delay drawing down their retirement assets. However, tax experts have criticized the provision, saying it would only benefit wealthy retirees.
According to a December 16 letter from 45 organizations, including Americans for Tax Fairness, the change “will primarily help the rich shelter income from taxes for longer periods of time and build up more wealth for heirs,” according a December 16th letter to Congress.
“Pre-retirees can save more money
The bill could help older workers, known as “pre-retirees”, who are only a few years away retirement.
Starting in 2025, people in their 60s and early 70s will be able increase their catch-up savings by up to $10,000 per annum, from $6,500 currently.
This provision has been criticized for only assisting upper-income workers. The December 16 letter stated that this provision only benefits those workers who have enough cash to take advantage the new higher limits.
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I have been writing professionally for over 20 years and have a deep understanding of the psychological and emotional elements that affect people. I’m an experienced ghostwriter and editor, as well as an award-winning author of five novels.