Many policy changes are underway in the United States, and some of them could affect how you manage your retirement. One new bill making its way around the halls of Congress is called the “Secure a Strong Retirement Act of 2021,” and investors and retirees would be wise to keep an eye on it.1
The bill is far from becoming law, but here are four early takeaways to be aware of:
1.Increase the “Catch-Up” Contribution Provision for Older Workers
As it stands today, the contribution limit to 401(k)s stands at $19,500, but workers over the age of 50 can contribute a ‘catch-up’ of $6,500 each year to boost savings. Under the ‘Secure Act,’ workers between the ages of 62-64 would be able to contribute $10,000 extra per year and index those contributions to inflation. We’re all for extra-saving capabilities.
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Surviving This Market’s Extreme Volatility
Throughout this past year, we’ve seen the stock market plunge numerous times just to bounce back up. While witnessing these turbulent patterns, it’s completely normal for investors to worry about another bear market around the corner. That’s why there is no better time for investors to gain a better understanding of bear markets and how they work.
To help you understand market downturns and steps you can take to protect your assets during the next bear market, you’re invited to get our free guide – Everything You Need to Know About Bear Markets.2
If you have $500,000 or more to invest, get this helpful guide today. It walks through the history and types of bear markets, how investors typically react to extreme volatility, and what we can learn from the history of bear markets and pandemics.
Download – Everything You Need to Know About Bear Markets
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2. Push the Requirement Minimum Distribution Age Higher
Congress has already made a couple of changes to RMDs recently. In the first ‘Secure Act,’ the age for required minimum distributions was raised from 70.5 to 72. Then, as part of the Covid-19 stimulus packages, the government suspended the RMD for 2020. The requirement for folks over 72 to take their RMDs is back, but the new bill circulating Congress could push the starting age up to 73 next year and gradually climb up to 75. We’re all for allowing your retirement money to grow longer.
3. Making Automatic Contributions in Employer Plans Mandatory
This provision of the new ‘Secure Act’ is a bit less desirable in our view, as it forces employers and employees to engage in certain behavior regarding finances. The goal of the provision is admirable and arguably essential – people need to save more, so why not mandate it? But we think individuals should be allowed to save and spend however they see fit, relative to their unique goals and financial situation. Under the new bill, however, employees would be mandated to put 3% of their income into 401(k)s, but negotiation on the bill may end up allowing them to opt-out.
4. Increasing the Qualified Charitable Contribution Limit
This feature of the new bill would be useful for high-net-worth investors who are charitably oriented and/or want to lower their tax bill in a given year. Currently, an investor can contribute $100,000 to charity and have it count towards their RMD, but under the new bill, the limit would be raised to $130,000.
There are a few other provisions in the bill, but these four appear – for now – to be the one that may affect high-net-worth investors and retirees the most. Of course, the bill has a long way to go before becoming law, and provisions could change considerably between now and then. But these four are worth watching going forward.
The past year has shown us just how quickly the stock market can change, and how critical it is for investors to know how bear and bull markets work.
To help you understand market downturns and steps you can take to protect your assets during the next bear market, you’re invited to get our free guide – Everything You Need to Know About Bear Markets.3
If you have $500,000 or more to invest, get this helpful guide today. It walks through the history and types of bear markets, how investors typically react to extreme volatility, and what we can learn from the history of bear markets and pandemics.
Disclosure