By Zack Hochberg
On Thursday, the Senate approved a $1.7 trillion spending bill for the year that includes a significant retirement package, which will now be sent to the House for consideration.
That bill includes a number of retirement provisions, known as "Secure 2.0” that will further the efforts made under Secure 1.0.
Why is it Secure 2.0?
The SECURE Act, which was signed into law in 2019 by then President Donald Trump, increased the age at which savers must begin withdrawing from their retirement accounts from 70 ½ to 72 and established ways for retirement plans to pool resources and reduce costs.
SECURE Act 2.0 aims to further these efforts by raising the required minimum distribution age again and allowing more plans to access pooled investment features. It also aims to add new components to private-sector workplace plans to protect against financial struggles that workers may face during a pandemic, such as COVID-19, and to encourage more workers to set up retirement plans.
Secure 2.0 includes a proposal that would require certain employers with retirement plans to automatically enroll eligible workers in those plans.
This proposal would apply to new 401(k) and 403(b) plans starting in 2025, with certain businesses being exempt, including those with 10 or fewer employees, those that have been open for less than three years, and church and government plans.
Lawmakers Concerned about Retirement Savings Gap as Many Americans Lack Access to Employer-Sponsored Plans and Are Not Saving Enough
Lawmakers are concerned that not enough Americans are saving for their retirement, and these concerns are well-founded.
AARP research shows that nearly half of working-age Americans, or 57 million people, don't have access to an employer-sponsored retirement savings plan. These plans are generally the easiest and cheapest way to save for retirement, and many Americans who don't have access to them aren't saving at all.
Even those who do save may not be saving enough, according to the Federal Reserve's Survey of Consumer Finances. The median retirement account in 2019 was $65,000, and older Americans had saved an average of $134,000.
Only about half of workers were saving enough to last them throughout their retirement, meaning that only a small fraction of the workforce will be able to retire without assistance. This assistance comes in the form of costly social safety nets that may strain state and federal government resources in the future. That's why lawmakers are working to address the retirement savings gap now.
"It's encouraging that lawmakers are continuing to give retirement policy the attention it needs," Dan Doonan, executive director of the National Institute on Retirement Security, said in a statement. "We're pleased to see provisions in SECURE 2.0 that will improve access to retirement programs and help more workers set aside savings. Far too many Americans face a frightening retirement shortfall."
About the author: Zack Hochberg
Zack is a journalism student at Quinnipiac University. In addition to writing for Retirement Daily, he also covers Quinnipiac Athletics and the Boston Celtics as well as owning a marketing company, Hochberg Marketing.