The U.S. House of Representatives recently passed a new retirement bill called SECURE 2.0, which is designed to build upon the SECURE Act of 2019.
SECURE 2.0 aims to make it easier for workers to prepare for retirement, and there are three major changes that could help your savings go further.
- It proposes raising the minimum age at which you have to start taking required minimum distributions.
- For every dollar an employee pays toward eligible student loans, the employer can match those contributions in the worker’s 401(k).
- It would raise the limit on catch-up contributions for workers between 62 and 65 to $10,000.
The new bill is still under review in Senate and isn’t law just yet, but here’s what to expect if it passes.
1. Increased RMD age
If you’re saving in a 401(k) or traditional IRA, you’ll need to start making required minimum distributions (RMDs) once you turn 72 years old — whether you’re ready to retire at that age or not.
This is because you’ll owe income taxes on your withdrawals, and Uncle Sam wants that money eventually. RMDs ensure that you’re not leaving your savings in your retirement fund indefinitely. The original SECURE Act raised the age you must start taking RMDs from 70 1/2 to 72, and SECURE 2.0 proposes increasing it again to age 75 by 2032.
If you plan to continue working well into your 70s, this could help your money last longer. Right now, you’ll need to start making withdrawals at age 72 even if you don’t need that money. Under the new bill, though,…
