Encouraging retirement savings is a laudable goal, and the House recently overwhelmingly passed bipartisan legislation to that effect; “Securing a Strong Retirement Act of 2022,” is often referred to as SECURE 2.0 because it builds, in certain respects, on the successful bipartisan SECURE legislation enacted in 2019. A careful examination of the proposed legislation finds many good provisions, but also bad ones needing elimination or modification in the Senate version. Of most concern is the major financing feature (the “pay-for”) used to achieve budget neutrality; it is a gimmick that should be replaced.
First, the good. Under SECURE 2.0, the age to begin required distributions from retirement plans and IRAs is increased to 75 from the current 72. This increase is a long overdue recognition of the higher life expectancy of senior Americans and their extended working lives. For many, the retirement drawdown need not start as early as in the past and should last longer. Similarly, certain barriers to life annuities are removed, encouraging the innovative use of these longevity security instruments in retirement plans. To give more flexibility to workers whose available earnings rise later in life as family financial obligations subside, there is also an increase at ages 62, 63 and 64 in the allowable extra post-age-50 “catch-up” contributions to retirement plans, and an indexing of the IRA catch-up limits. At the other end of the life cycle spectrum, the legislation allows employers to make matching contributions to a retirement plan for workers who are paying back student loans. This too is a reasonable recognition of the liquidity constraints under which many younger workers increasingly operate, while still needing to start saving for retirement.
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