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Tax Benefits for Retirement Savings Expanded

The House of Representatives has just passed legislation increasing the tax benefits on retirement accounts for Americans. The Securing a Strong Retirement Act (or Secure Act 2.0) builds upon the first Secure Act, which was approved unanimously in a bipartisan vote by the House Ways and Means Committee. There has been an increased focus on Americans retirement savings recently, as many individuals do not have anything saved for when they stop working.

Bill Details

The Securing a Strong Retirement Act was recently approved on a 414-5 vote, creating a lot more provisions that will benefit both retirement savers and employers alike.

One provision would make it a requirement for employers to automatically enroll eligible workers in 401(kplans at a rate of 3% of salary. This would increase annually until the employee is contributing 10% of their pay (employees can opt-out or select a different contribution amount). Businesses would be excluded from this requirement if they employ under 10 people, or are less than 3 years old.

Another provision would help out savers who are looking to make catch-up contributions, as the limit will be increased to $10,000, up from the current $6,500. Additionally, Secure Act 2.0 increased the starting age for required minimum distributions to 73 in 2022, 74 in 2029, and 75 by 2032 (which are all up from the current age of 72).

Americans who have a lot of outstanding student loans would also benefit greatly from the Secure Act 2.0! Through these changes, employers would be allowed to match student loan payments as contributions to retirement. This would greatly benefit those who may not be able to make 401(k) contributions, as they would still be able to receive an employer match on the amount contributed to the payments.

The Secure Act 2.0 beyond what is mentioned above also allows savers to determine if they want employer-matching contributions to be on a pre-tax basis, or a Roth basis. Additionally, changes are being made for survivors of domestic abuse, small business owners, and low-wage workers. Additionally, it will also create a national database for Americans to reclaim lost retirement accounts.

Wrap-Up

 

With so many changes being made, many Americans will have the opportunity to capitalize on the expanded benefits to come out of the Secure a Strong Retirement Act. This being said, not all current retirement plans are taking advantage of the new legislation, which is why it may be a smart idea to speak with your trusted advisor today!

Questions? Concerns? Call DSJCPA at 516-541-6549 and visit our website for more information.

 
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