Bill will boost retirement savings

Many provisions won’t take effect immediately

Big changes are coming for Americans’ retirement savings.

The changes, part of the Secure Act 2.0, were included in the sweeping end-of-year $1.7 trillion spending bill passed Friday.

Many provisions won’t take immediate effect.

Included in the broad retirement package are measures to allow employers to count employees’ student loan payments toward their retirement match and increases in the age you’re required to begin withdrawing from taxdeferred retirement accounts.

Earlier this year, the House of Representatives passed the Securing a Strong Retirement Act of 2022, and the Senate approved The Enhancing American Retirement Now Act (EARN) and the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act (RISE &

SHINE). These three bills are the basis for the Secure Act 2.0, which builds on the 2019 Secure Act.

The 2019 Secure Act included giving parttime workers better access to retirement benefits and increasing the age when required minimum distributions from certain retirement accounts must start to age 72 from 701⁄2.

401(k) changes for people paying off student loans: The Secure Act 2.0 is meant to help Americans save for retirement, and one particular proposal that would go into effect in 2024 and allows companies to contribute to 401(k) plans for an employee making student debt payments could help solve a problem affecting millions of people.

Eighty-four percent of adults said student loans limited the amount they’re able to save for retirement, according to a 2019 study by the Massachusetts Institute of Technology Age Lab and financial services organization TIAA. Among those who weren’t saving for retirement, 26% said it was because they had to put their money toward paying off student loans.

The program considers student loan payments when determining the company’s 401(k) contribution.

Required minimum distribution age: The Secure Act 2.0 pushes up the age when you’re required to begin taking the minimum distribution from a tax-advantaged retirement savings account. Currently, the mandatory age to begin making withdrawals is 72. But starting Jan. 1, 73 will be the new age.

And in 2033, the age to begin taking required minimum distributions will rise to 75.

People who turned 72 in 2022 will still have to take minimum distributions.

Automatic 401(k), 403(b) enrollment: If your employer has a 401(k) or 403(b) retirement savings plan, you will be automatically enrolled once you’re eligible. This means that money will be taken out of each of your paychecks and transferred to the retirement savings account unless you opt out. The act specifies that the initial contribution must be at least 3% but not more than 10% of your pretax earnings.

Small businesses with 10 or fewer employees, and businesses that started less than three years ago, would be exempt.

Effective date: Jan. 1, 2025.

Emergency withdrawals: Typically you have to pay a 10% tax if you withdraw money from a tax-preferred retirement account before your turn 591⁄2 unless you satisfy an exemption. The new act adds an exemption “for purposes of meeting unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses” allowing you to withdraw up to $1,000 a year penalty-free.

If you don’t replenish the money within three years, however, you will face penalties if you make another emergency withdrawal for the same reasons.

Even with the new provision “withdrawing early from a retirement account should be a last resort,” said Ed Slott, founder of IRAHelp.com and author of “The New Retirement Savings Tax Bomb.”

Effective date: Jan. 1, 2024

529 plan changes: If you have money left over in a 529 account – a tax-advantaged investment account that can be used only to cover educational expenses – you will be able to roll over up to $35,000 into a Roth IRA account without facing penalties.

This applies only to 529 accounts that were opened at least 15 years ago. Also, you still must adhere to annual IRA contribution limits.

Effective date: Jan. 1, 2024