7 Retirement Changes by Congress

If Congress agrees on a huge spending bill this week, new retirement rules might make it easier and cheaper for Americans to save for retirement. Read the 7 retirement changes that are on the table right now.  

Secure 2.0 retirement savings provisions came from a House bill and two Senate committee bills.

“[SECURE 2.0] will help increase savings, ensure greater access to workplace retirement plans, and provide more workers with an opportunity to receive a secure stream of income in retirement,” Thasunda Brown Duckett said, president, and CEO of TIAA, which is one of the largest US retirement service providers.

The Senate Finance Committee broke down seven of the omnibus’s components.

1: Need 401(k) auto-enrollment

Most new business retirement savings programs must automatically enroll employees. (Currently, employers can opt out.) If they don’t want to take part, employees have the choice to opt out.

The Secure 2.0 provision would compel employers to set a default contribution rate of at least 3% but no more than 10% for employees and an automatic contribution escalation of 1% per year up to a maximum contribution rate of 10% but no more than 15%.

After December 31, 2024, the provision would apply.

2: Employer student loan contributions

Student loan debt makes retirement savings difficult. Secure 2.0 allows companies to match student loan payments to retirement plans. So the employee always saves for retirement.

After December 31, 2023, the provision would apply.

3: Raise the minimum distribution age

When you turned 70-1/2, you had to withdraw a minimum amount from your 401(k) or IRA each year. Then, 72. It would rise to 73 in 2023 and 75 a decade later under Secure 2.0.

4: Help workers save for emergencies

If you withdraw your 401(k) before 59-1/2, you must pay taxes and a 10% early-withdrawal penalty.

Secure 2.0 may reassure employees who worry about accessing their tax-deferred retirement plan for emergencies: Employees might withdraw $1,000 per year without penalty. If they reimburse the withdrawal within three years, employees can recover their income tax back.

If they don’t repay the withdrawal, they can’t make another emergency withdrawal for three years.

After December 31, 2023, the provision would apply.

5: Increase elderly worker catch-up contribution limits

If you’re 50 or older, you can contribute $6,500 to your 401(k) above the $20,500 federal maximum this year.

Instead of $6,500, people 60–63 could contribute $10,000 or 50% more than the catch-up amount in 2025, whichever is greater, under the retirement plan.

After December 31, 2024, the provision would apply.

However, a year earlier, everyone earning over $145,000 would have to “Rothify” their catch-up payments to help pay for the retirement package. Instead of making before-tax contributions up to the catch-up maximum, you might donate the same amount but be taxed on it the same year. Your donation would grow tax-free and be tax-free in retirement. The federal government would get tax income from the original catch-up contribution upfront.

6: Improve and simplify Saver’s Credit

Lower-income retirees can get a $2,000 government match. The new package would make the Saver’s Credit easier to use. Married couples earning $71,000 or less are eligible for a 50% federal matching contribution up to $1,000.

After Dec 31, 2026, the provision would apply.

7: Help part-timers save

If they’ve worked three years and 500 hours a year, part-time workers can join a retirement plan. The new bundle reduces service duration to two years.

After Dec. 31, 2024, the provision would apply.