I Want to Believe – Can Secure Act 2.0 Make Retirement Planning Compelling?

I Want to Believe – Can Secure Act 2.0 Make Retirement Planning Compelling?

I’m the slowest to join. Laggard to jump, rough to convince.

In the hallway at a major Russian news agency, my boss Tracy was yelling, hopping mad. “Oh my GAWD! You’re so stubborn!” I’d introduce more capitals and exclamation points, but this blog is classy.

I feigned astonishment. ‘Golly. Well, then. I’ve never heard that one before.’ She managed a smile, realized I wasn’t trying to thwart her out of malice or contempt. I’m just a prickly pear, is all.

Stubborn, that’s me. As old Plymouth Rock holding back the Atlantic, the Minutemen holding off Redcoats at Concord, the Minutemen punk band refusing to tune up in the 9:30 Club in DC, one-hundred-and-ten years on. And don’t you know, for many years, I thought it was a virtue.

Last one on the block – nay, Earth, to buy a cellphone; Sabina, my siren from Kazan, Russia, screamed at me for that one. Same timeframe as Tracy, hmm. I was being selfish, she said; not owning a phone inconvenienced my friends, who wanted to call, know why I was late for dinner; should they order an appetizer? I gave in, realized right away what the fuss was about, joined the 21st century a bit.

Years later, Rebecca, my editor, gave me her old smartphone, a cracking fine beauty (R. will intentionally misinterpret this compliment as pertaining to her: she’s a vain, open-handed wonder). I thought they were boat anchors; they’re really chain breakers. Last to know, as I said.

Retirement planning accounts offered by employers can be just the same – yes, they can. Workers have an easy path to saving for retirement, while their company handles the paperwork – and usually makes a matching contribution. Yet participation rates are low. According to Morningstar, as of 2019, 56% of staff were participating in a workplace retirement plan, and 43% availed themselves of a defined-contribution plan like a 401(k). I think we can do better.

Why doesn’t the government act? Dread words, those last five – or should we count the contraction as two, making it six? Writers and editors face unquiet slumbers, worrying about issues like this. Yet the state can be helpful: greasing the skids, raising awareness, offering treats for participation. It’s happened before – the state getting it right. I’m not making with the funny stuff here; stick with me.

I ask that the reader recall the SECURE Act of 2019 – that Setting Every Community Up for Retirement Enhancement Act. I had mixed feelings about it, as SECURE killed the venerable stretch IRA strategy. We all end up moldering in the grave, alas, so it was no time to lament, for the Act’s aim was true.

The SECURE Act was intended to increase citizen access to tax-advantaged retirement accounts, so they could build a nest egg to last their expanding lifespans. Today’s hale-and-hearty can look forward to 90 years, a pleasant prospect if you’re living on life’s golden highway, not under one of its bridges.

Surveys galore show that Americans are worried about living beyond their retirement means, and they don’t trust the government to fund the difference. The people are wise, it seems to me.

The problem was so obvious that Congress took note and acted. This came at a time of such strangling partisanship that I search for a metaphor… it made the War of the Roses look like a bed of its petals. Political discourse is prickly today, yet the House Ways and Means Committee has decided – unanimously, I declare – to shift its proposal for an updated SECURE Act to the floor for debate and a vote.

The bill is officially titled the Securing a Strong Retirement Act – Secure 2.0, they’re calling it. It’s a product of bipartisan efforts, as noted, and while Congressional debate (aka backroom horse swapping) will likely modify its provisions, it looks to have legs to trot.

Here’s the quote from the joint statement of the bill’s sponsors that you’ll get tired of seeing – but hang on, as it’s pithy: “The retirement crisis in America is real, and will only get worse without easier pathways to saving and encouraging workers to start planning for retirement earlier in life.” That’s it, see: the tools are ready to use, but people aren’t picking them up.

Secure 2.0 would encourage everyone to help themselves. Any employer who establishes a defined contribution plan after this year would be required to automatically enroll all new employees. A worker can opt out, but experience shows that few do – once you’ve used a smartphone, you get it, won’t go back to compass and map (for one thing, the latter isn’t backlit at night). Saving for retirement, watching the money grow as worry subsides, is pleasurable and habit-forming.

I’d better quote the bill’s summary on employee contribution levels, as news reports are bungling the clarity thing. It is a jumble: “The initial automatic enrollment amount is at least 3 percent, but no more than 10 percent. And then each year that amount is increased by 1 percent until it reaches 10 percent.” This is a guideline: employees can adjust their contributions to a comfortable level or, if they’re sufficiently desperate or foolish, opt out entirely.

The maximum annual contribution is set at 15% of the employee’s salary. Currently held 401(k) and 403(k) policies would be grandfathered in – no quotes here, just a mite of mild plagiarism. It’s OK, it’s the government; we already own it all.

There are many other provisions, including measures to protect small businesses, support catch-up contributions via higher limits, and allow Roth-style (post-tax) money to be invested. The mandatory distribution threshold would be reset to age 73 next year (under the SECURE Act, it’s 72) and rise to 75 by 2032. For die-at-your-deskers like me, that’s good news. Part-time workers would also receive incentives to join the 401(k) system.

Secure 2.0 isn’t law yet, and the final version may be different from the committee’s proposal. Retirement industry spokesmen should chime in now, and ordinary citizens might email their reps as well. It’s nice to see our Congressmen working together on a sensible issue, and encouragement could bring more of the same.

I wonder if you’ve noticed the rumors blooming over UFO sightings and a purported ‘government briefing’ coming to screens shortly. I’d normally be first to snort and scoff, but I’d also rate extraterrestrial tourists as likelier than Congressional harmony. Well, what can I say? Maybe they’re really out there, watching us closely, scratching their furrowed, befuddled green heads.

Loophole or Lifeline: Should the Step-Up in Basis Step Down? It’s Still Up to You - Biden Proposes Billions for LT Care Reform