Planning for your retirement may have just gotten a little easier.
Today’s economic climate demands that we prioritize retirement savings to secure our golden years. Late in 2022, President Biden signed an act into law that could impact the way you save. Fortunately, these should be helpful changes—but knowing how to take advantage of them is key.
Here’s what we’d recommend.
Your Quickstart Guide to Understanding the SECURE 2.0 Act
SECURE 2.0 builds on its predecessor, the 2019 SECURE Act, to streamline and broaden the process of saving for retirement—particularly for individuals with lower incomes or who have part-time positions.
Want a brief summary of SECURE 2.0’s provisions?
SECURE 2.0 expands access to retirement plans, which should allow more people to invest in their future.
SECURE 2.0 simplifies the process of saving for retirement, which has been a confusing ordeal in the past.
SECURE 2.0 focuses on making the possibility of a good retirement inclusive and accessible by addressing the needs of part-time workers and low-income earners.
However, just because that is SECURE 2.0’s focus doesn’t mean that everyone can’t benefit from the way it enhances 401(k) plans.
How Does SECURE 2.0 Enhance 401(k) Plans?
Here are the main ways SECURE 2.0 enhances 401(k) plans:
1. 401(k) plans are now eligible for mandatory automatic enrollment.
New 401(k) plans can automatically enroll employees, which should reduce the logistics, paperwork, and headaches that have surrounded setting up 401(k) plans in the past.
2. Employers can now offer small incentives to boost participation in retirement plans.
These are referred to as “de minimis incentives,” and should help increase participation in qualifying 401(k) plans.
3. SECURE 2.0 creates a nationwide 401(k) plan database.
It can be surprisingly easy to lose track of funds or even plan participants! Under SECURE 2.0, a national online searchable database will be created to help keep track of these plans.
This may sound intriguing—but it can be challenging to know precisely how SECURE 2.0 will impact you right now or later. In large part, this depends on where you’re at in your retirement savings journey.
Implications of SECURE 2.0: What Does This Mean for You?
Wondering how you’ll engage with SECURE 2.0’s updates? We’ll break it down for you based on your current relationship with retirement.
If you’re not yet contributing toward retirement, SECURE 2.0 should make it easier for you to get started. Now, if your employer offers a 401(k) plan, your onboarding and enrollment process should be much more straightforward (and even automatic).
If you’ve just started contributing toward retirement in the past few years, SECURE 2.0 should simplify your options for diversifying and growing your retirement portfolio. For example, you might have access to new investment options within your 401(k), or you could be able to consider Roth 401(k) contributions. Even better, your employer may start offering small incentives like matching contributions or financial wellness programs to help you prioritize retirement savings, which can be difficult during your early contribution years if you’re also moving through other important life milestones.
If you’re several years away from retirement, but hardly new to the game, SECURE 2.0 may give you new tools to help you ensure your retirement stays on track and adapts to changing economic times, such as increased catch-up contribution limits. (Talk to your community banking team to see if you can take advantage of any of these strategies!)
If retirement is just around the corner for you, SECURE 2.0 can help you increase your peace of mind about retiring by giving you flexible planning options and possible ways to maximize your savings during your final working years, such as by diversifying your investment strategies to balance growth and security.
If you’re already in retirement (congratulations!), you may have updated options surrounding the way you manage existing retirement funds, such as changes in required minimum distributions. (Check out this other blog for more information about that!)
No matter where you are in your retirement planning process, SECURE 2.0 should enhance, simplify, and customize the way you save up for and enjoy your time in retirement.
As you navigate your way toward retirement amidst the recent changes brought on by SECURE 2.0, remember, that your friendly neighborhood professionals at BNC National Bank are here to help. Wondering how to make the most of these new opportunities? Check out our Guide to Retiring for all your need-to-know next steps.