The Securing a Strong Retirement Act would dramatically improve Americans’ ability to build enough savings, according to a specialist from the Baker Institute for Public Policy at Rice University.
A significant number of Americans are not saving enough for their retirement, according to Joyce Beebescholarship holder in public finance at the institute. The law projectalso known as SECURE Act 2.0 because it builds on the Establishing Every Community for Retirement Enhancement Act, 2019would boost savings by adding flexibility in contributing and using employer-sponsored retirement accounts, she argues.
Beebe is available to speak to the media about the legislation.
“Legislators believe such flexibility will allow workers to start saving earlier and for longer durations,” Beebe wrote in his Baker Institute blog post. “The revisions also make it easier for workers to save at all stages of life.”
The SECURE law has increased the age at which a taxpayer must take minimum distribution required of their IRAs from 70 1/2 to 72. The SECURE Act 2.0 would gradually increase the age to 75 by 2033.
“This provision allows workers to keep retirement funds in their accounts longer, which benefits both workers who decide to work longer and workers with strong savings who do not need to make IRA withdrawals,” Beebe wrote.
The bill would also require new workplace plans to automatically enroll eligible employees. Workers would start with a 3% contribution on their salary, with the amount increasing by 1% per year until it reaches 10%, unless participants opt out. This would help workers start saving earlier and thus benefit from compound interest, Beebe said.
The bill would also make it mandatory that employees who work part-time for a company for two years and at least 500 hours a year be allowed to participate in that company’s retirement program.
In addition, the bill would codify a provision long advocated by proponents of student loan relief.
“Employer-sponsored plans such as 401(k) and 403(b) will be allowed to match participants’ student loan payments similar to retirement plans,” she wrote. “In other words, employees with student loan balances can pay off their student loans instead of contributing to pension plans while benefiting from the matching contribution from employers.”
Beebe says SECURE Act 2.0 has strong bipartisan support in the House, even though the Senate is expected to amend it later this year.
“Whatever the final bill includes, the package should refine the SECURE Act and provide more incentives for American workers to save for retirement,” she said.