Here’s the latest update on SECURE Act 2.0. If you’ve been diligently saving for retirement over the years, you may be on the right track or wish you had started earlier or saved more aggressively. On the other hand, you most likely know people in their thirties who haven’t started saving for retirement yet due to financial constraints.
However, thanks to the new SECURE Act 2.0, recent graduates and career starters will experience automatic enrollment in a 401(k) when hired. In this blog post, we shed light on the changes brought about by this new law and how it can shape retirement savings for individuals at different stages of their careers.
What Changes Can We Expect from SECURE Act 2.0?
SECURE 2.0 provides enhanced incentives for employers, especially small businesses, to establish retirement plans. Employers can receive tax credits covering up to 100% of plan-startup costs, subject to certain limits. In some cases, it could be virtually free for employers to set up a retirement plan, depending on the number of employees.
Employers in states with retirement plan mandates, like Connecticut, may consider offering an IRA or a 401(k). A 401(k) is a more comprehensive option for employers, and the tax credit for employer contributions makes it appealing. While the tax credit for employer matches is not permanent, it eases the process for employers during the initial setup period.
Under SECURE 2.0, employers can match student loan payments as if they were elective contributions to a 401(k). If a recent graduate chooses to pay off student loans, the employer can match those payments as 401(k) contributions. This is significant, and many individuals are expected to take advantage of it. Regulatory guidance is still awaited.
Any Changes for Existing Retirement Plan Holders?
SECURE 2.0 increases the minimum distribution age to start drawing down their retirement plan once they reached certain retirement age. SECURE 2.0 increases this age to 73, allowing individuals to keep their funds invested for a longer period. This change may impact those looking to build generational wealth.
Looking Ahead
Over time, there has been an ongoing debate about the purpose and regulation of 401(k) plans. Originally designed to supplement pensions, 401(k) plans have become many Americans’ primary retirement savings vehicle. It is often the second-largest asset after a home. The question of who should be responsible for managing 401(k) plans and whether they should be more highly regulated continues to be a topic of discussion in the industry.
Navigating these changes and understanding how they impact your retirement savings can be complex. If you have questions or need assistance, consider consulting with a financial advisor or wealth management professional who can provide guidance tailored to your specific situation.
At Quantum Strategies Wealth Advisory, we are here to help you make informed decisions about your retirement planning and ensure that you maximize the benefits of SECURE Act 2.0. Contact us today to discuss your financial goals and explore the right strategies for you.