On Tuesday March 29th, The House Of Representatives passed the Secure Act 2.0, a bill that is aimed to improve the retirement savings system for U.S workers. The legislation will now head to senate for its decision.
According to the House Ways and Means Committee Chairman Richard Neal, D-Mass., “H.R. 2954 will help all Americans successfully save for a secure retirement by expanding coverage and increasing retirement savings, simplifying the current retirement system, and protecting Americans and their retirement accounts,” he ahead of the Tuesday vote. “Too many workers reach retirement age without having the savings they need.”
According to a Wall Street Journal article, the bill proposes that “legislation would gradually increase the age at which savers must start taking withdrawals from 401(k)-type accounts and traditional individual retirement accounts to 73 next year, rising to 74 in 2030 and 75 in 2033.” As of right now, people who have a retirement savings account must start withdrawals at age 72, so this will help those who wish to grow their money longer or may not need it quite yet.
In addition to the increased age to take RMDs, the new bill will allow older workers to make larger contributions to their 401(k)s. According to WSJ, “people 50 and older can contribute an extra $6,500 a year to 401(k)-style retirement accounts, for a total of $27,000. The legislation would raise that to $10,000 a year starting in 2024 for people ages 62, 63 and 64. The bill would require catch-up contributions to be made after taxes. Under the legislation, starting in 2024, the extra $1,000 people 50 and older can contribute annually to an IRA would rise to account for inflation.” Again, this added benefit is a huge opportunity for individuals who maybe missed out on the early years of retirement savings.
This bill and the ultimate Senate decision could be huge for individuals, especially older ones, who want to boost and make the most out of their retirement savings by allowing them to maximize them in their later years. We will continue to follow updates from Senate on the progression and eventual implementation of this bill. If you have any questions for us, email us at info@shermanwealth.com.
