Retirement Outcomes for Older Workers Gain with Proposed Legislation

Improve Retirement Readiness

Retirement outcomes for older workers could improve thanks to new legislation under review by policymakers in Washington.

The proposed law includes significant upside benefitting retirement outcomes for older workers.  This includes improved retirement outcomes for older workers – by enabling retirees and senior-workers to keep more of their hard-earned savings.  The Securing a Strong Retirement Act of 2020 has a lot at-the-ready for Seniors.  It is a follow-on to the Setting Every Community Up for Retirement Enhancement Act.  The act is better known as the SECURE Act and was passed in late 2019.  The SECURE Act was an historic piece of retirement legislation that seemed to gain bi-partisan support.   SECURE Act was designed to strengthen retirement outcomes by improving workers’ long-term financial well being.

Gary Halbert of Halbert Wealth Management, authored a recent article in Advisor Perspectives where he addresses some of the benefits for Seniors.  Following are primary provisions being proposed to help improve retirement outcomes in the Securing a Strong Retirement Act 2020:

  • Promote savings earlier for retirement by enrolling employees automatically in their company’s 401(k) plan, when a new plan is established;
  • Create new financial incentives for small businesses to offer retirement plans;
  • Increase and modernize the existing federal tax credit for contributions to a retirement plan or IRA (the “Saver’s Credit”);
  • Expand retirement savings options for non-profit employees by allowing groups of non-profits to join together to offer retirement plans to their employees;
  • Offer individuals 60 and older more flexibility to set aside savings as they approach retirement; and
  • Allow individuals to save for retirement longer by increasing the required minimum distribution (RMD) age from 72 to 75.

Within these provisions, there is good news for older workers’ retirement outcomes.

For instance, the increase in the age requirement for RMDs from 72 to 75 means seniors who plan to work into their mid-70s and beyond can leave their money in their retirement accounts longer without being forced to take distributions.  It also gives their savings more time to grow, and helps them avoid being pushed into a larger tax bracket by having to take RMDs on top of their earned income if they’re still working.

Another proposal inside the new legislation could help improve retirement outcomes by doing away with RMDs altogether for retirement account balances of less than $100,000 — a potential benefit to retirees who are trying to stretch their savings and minimize withdrawals.  It also allows retirees to rely on Social Security and other sources of retirement income first, giving their savings more time to grow.  And not having to take RMDs also means they can avoid draining their retirement accounts too quickly — another win for retirement outcomes for older workers.

The new legislation also proposes raising the catch-up contribution limits for those age 50 and older from $5,000 to $10,000.  It would significantly impact retirement outcomes in a good way by allowing older workers to save for retirement.

Whether or not this new legislation will pass is still TBD.  However, it does behoove plan sponsors to start considering how these provisions may impact retirement outcomes.  This can occur for older workers and plan participants in particular.


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