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Government Introduces NEW Updates To 401(K) & 403(B) Retirement Plans (Secure Act 2.0 Explained) - YouTube
Channel: Money and Life TV
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rules for retirement accounts keep changing and聽
evolving in this video i'm going to discuss five聽聽
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significant changes that are likely going聽
to be coming down the pipeline the house聽聽
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ways and means committee recently approved a聽
second bill a bill that would continue to tweak聽聽
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the rules for contributing to and withdrawing from聽
retirement savings accounts they're calling this聽聽
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secure act 2.0 believe it or not it's already聽
been about two years since the original secures聽聽
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act passed and just like the first secures act聽
secure act 2.0 really aims at further enhancing聽聽
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people's ability and accessibility to access and聽
contribute to retirement accounts the government聽聽
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really wants to see greater participation from聽
people like yourself saving for retirement and聽聽
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they're just not seeing that so with this new聽
secures act the version 2.0 i think you're聽聽
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really going to see how they're trying to make聽
that easier for you and trying to incentivize聽聽
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you to participate to be clear i'm not saying聽
you should or shouldn't that's up to you but聽聽
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i think that's what they're after here as of this聽
moment this is something that is expected to pass聽聽
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in 2021 but if not this year then we're looking聽
at 2022. knowing that this is likely going to pass聽聽
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let's talk about some of the most significant ways聽
this is going to affect retirement contributions聽聽
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and retirement withdrawals in the future number聽
one the proposed legislation would again raise聽聽
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the age to begin taking rmds if you don't know聽
what that is rmd is required minimum distribution聽聽
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but this time they're looking at raising that rmd聽
age to age 75. but this isn't something they're聽聽
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looking at doing overnight this is something聽
they're looking at doing over a 10-year time聽聽
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horizon these rules would generally apply to聽
traditional 401ks and ira accounts currently聽聽
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the highest required minimum distribution age is聽
currently 72 but this could change as early as聽聽
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january 1st of 2022 and be raised to the age of聽
73 it's looking like it wouldn't actually bump聽聽
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up to age 75 until january 1st of 2032. having聽
that higher rmd age is going to give you more聽聽
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tax planning options in retirement because you're聽
going to have more control of when you want to pay聽聽
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start paying taxes on those distributions聽
many people have other forms of income already聽聽
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and they're forced to take that rmd and it just聽
cranks up their tax bill super high and it's not聽聽
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good so i view having more control over when you聽
want to take that money out as a good thing number聽聽
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two the legislation would automatically enroll聽
eligible workers into 401k or 403b plans with an聽聽
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average savings rate of three percent of their聽
salary this doesn't mean that your employer is聽聽
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giving you three percent this means that three聽
percent is coming out of your own check you can聽聽
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opt out if you choose to if you want to save less聽
but this would automatically enroll you to start聽聽
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saving for retirement right away and once enrolled聽
for enrolled workers the contribution rates would聽聽
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automatically increase each year by one percent聽
until the contribution of the employee's salary聽聽
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reaches the level of 10 percent before we聽
move on to number three let me know in the聽聽
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comments how do you feel about being automatically聽
enrolled in one of these retirement savings plans聽聽
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for me personally if i'm coming fresh聽
out of college with student loans聽聽
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or i'm thinking about saving for a house i'm聽
probably opting out but that's just me the third聽聽
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change is going to allow workers to contribute聽
even more to the retirement savings account in聽聽
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particular those who are trying to make catch-up聽
contributions ketchup contributions are generally聽聽
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allowed for those who are age 50 and above or for聽
those who are closer to the age of retirement to聽聽
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contribute even larger dollar figures to their聽
retirement savings plans the individuals who聽聽
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meet this age criteria right now can actually聽
contribute up to 6 500 above and beyond the max聽聽
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contribution limits right now in 2021 the proposed聽
legislation is looking to take this even further聽聽
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so once you're age 62 to 64 instead of being able聽
to do catch-up contributions of 6 500 or more聽聽
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they're actually gonna raise that amount to聽
ten thousand dollars under this proposed bill聽聽
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furthermore the proposal also calls for ira聽
catch-up limits for those who are 50 years old聽聽
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to be indexed for inflation starting as early as聽
2023. this i'm totally in favor of there's a lot聽聽
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of people who i know who are around the age of 50聽
or over 50 who really haven't put anything towards聽聽
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retirement in any shape or form and let's be real聽
here a lot of people probably don't feel like they聽聽
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can save anything for retirement until later on in聽
life anyways because maybe they've been strapped聽聽
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with debt various forms of debt their whole life聽
and maybe their income is finally enough where聽聽
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they can do more than just get by so letting聽
them put more weight in retirement later on聽聽
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is definitely something i'm in favor of in fact聽
i think they should be let people who are even聽聽
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younger do this number four i find particularly聽
interesting i've never heard of anything like this聽聽
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you can earn employer matching funds on聽
your student loan payoffs let me elaborate聽聽
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you've probably experienced if you've spoken with聽
one of your co-workers about saving for retirement聽聽
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especially if they're fresh out of college they're聽
in the midst of trying to decide should they save聽聽
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for retirement or should they be paying off聽
their student loans or this battle that's going聽聽
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on inside their head of which one they should do聽
what they're looking at doing here is allowing the聽聽
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employer to make a matching contribution to the聽
workers retirement account based on the worker's聽聽
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own student loan payments this would apply to 401k聽
plans for 3b plans simple iras and 457b plans i聽聽
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almost think this is more so an incentive to get聽
people to start to pay off their student loans聽聽
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than it is to actually save for retirement but hey聽
if you get a matching contribution for doing it聽聽
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why not number five is what you should know is聽
that currently the simple and set by arrays are聽聽
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not allowed to accept roth contributions from聽
employees but under the secure act 2.0 that聽聽
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would change that and speaking of roth generally聽
contributions or matches from coming from your聽聽
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employer are usually set on a pre-tax basis well聽
this would allow them to be on a roth basis if聽聽
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you chose to do so now personally i consider those聽
to be like probably the top five most significant聽聽
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changes under secure act 2.0 but there's just a聽
few other things i want to mention that they're聽聽
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working on within this as well and i'll be sure聽
to leave a link to the article i used to produce聽聽
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this video in the comment section as well in the聽
description section of the video so feel free to聽聽
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check it out and read up on it further if you'd聽
like to if you've ever lost touch with a former聽聽
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employer don't know how to get a hold of them this聽
next one that will really help you out as they're聽聽
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going to make it easier for you to locate your聽
former employers and vice versa where the employer聽聽
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can locate former employees to match them with聽
funds that are sitting in an old 401k account now聽聽
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it varies from state to state but the average聽
balance for these unclaimed 401k accounts is聽聽
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anywhere from 500 to 2 000 however if the property聽
is left unclaimed long enough eventually the state聽聽
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is going to seize those assets and claim them for聽
themselves if you have one of these accounts out聽聽
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there somewhere from a foreign former employer聽
contact them make sure you get a hold of those聽聽
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funds and transfer that into an ira so that you聽
can keep the money and not give it to the state聽聽
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now if you're someone who works part-time and聽
has had difficulty being eligible to participate聽聽
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in one of these retirement plans they're going聽
to cut back on some of the rules there in order聽聽
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to allow you to participate a little sooner聽
than you normally would if you're somebody聽聽
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who has a 403 b plan you're generally limited聽
to just mutual funds and annuities but this聽聽
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is going to widen your investment selection to聽
collective investment trust something to watch for聽聽
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lastly this one is for employers okay employers聽
listen up so the what they're looking at doing聽聽
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is really they're going to try to incentivize聽
you with this new build to grant your employees聽聽
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more accessibility to these different retirement聽
plans and how they're going to do that they're聽聽
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going to be throwing tax credits your way several聽
new tax credits are coming out of this bill聽聽
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that you can utilize and claim to offset some of聽
the costs to start these kind of retirement plans聽聽
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at your organization those are the type of聽
retirement changes coming down the pipeline聽聽
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so stay tuned let's see if this passes i do think聽
it will based upon what i've been seeing if you聽聽
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enjoyed today's content do me a huge favor and聽
drop a like it really helps support the channel聽聽
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and also helps other people see this information聽
you can subscribe and follow our weekly videos聽聽
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around finances investing in taxes simply by聽
hitting the red subscribe button down below i'd聽聽
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greatly appreciate it but most importantly engage聽
in the comments i i really enjoy reading what you聽聽
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have to say in your opinions and i want to know聽
what do you think of the changes in the secure聽聽
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act 2.0 do you like it do you dislike it let me聽
know your thoughts all right well you know what聽聽
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to do go have yourself a wonderful week and i will聽
see you all in the next video live life uncaged
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peace聽聽
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you
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