For most Americans, retirement is the ultimate goal. This makes the laws and regulations around retirement saving extremely important. And while these regulations don’t often change, there has been a significant overhaul to specific regulations that could impact retirement savings for Americans in the past few years.
SECURE 2.0: Reshaping American Retirements
Where we are at now
In 2019, Congress sought to make retirement savings easier for Americans. As a result, the Setting Every Community Up for Retirement Enhancement Act — better known as the SECURE Act — was passed that December, paving the way for changes that would benefit those saving for retirement. These new policies hit on several areas of the retirement saving process.
Required minimum distributions (RMDs)
Congress recognized that Americans who were working well into retirement age shouldn’t be punished for doing so. Therefore, the required minimum distributions (RMDs) age was changed from 70.5 to 72 years old, which means retirement accounts will have more time to grow.
Age limits on contributions
For similar reasons to the change in RMDs, it was decided that workers should be able to continue making contributions to their retirement account as long as they are employed. Therefore, the previous limitation that restricted IRA contributions at age 70.5 were lifted for those still employed and working.
401k plans for part-time employees
Extending the scope of 401k plans to part-time employees allowed more workers to save for retirement. This new policy required employers to offer 401k plans to part-time employees if they worked more than 1,000 hours in one year or 500 hours per year over three consecutive years.
What the new “SECURE 2.0” bills propose
A change in government regimes has also necessitated a change in financial regulations. As a result, the SECURE Act is getting an upgrade that many call “SECURE 2.0”. These proposed changes serve to make it even easier for Americans to save for retirement and loosen many existing restrictions.
Note: At the time of publishing, the proposed changes mentioned here have not been passed into law and could change if the senate or house modifies the bills. We will update this section if and when any of these proposed changes come into effect.
RMDs to change again
While the original SECURE Act of 2019 helped push back required minimum distributions, the bill’s recent update plans to expand this to a larger degree. As of 2019, RMDs were set at 72 years old, but as part of the SECURE Act 2.0, retirees will be able to wait until the age of 73 to take RMDs beginning in 2022. Even further, the SECURE Act 2.0 bill will delay RMDs progressively in the future, with the age increasing to 74 in 2029 and 75 in 2032.
Another aspect of the SECURE Act 2.0 is to reduce the fee for failing to take an RMD by half. The fee now sits at 50% and would be dropped down to 25%. And if the error is corrected quickly, the fee will actually be reduced down to 10%.
These updates would all be great news for precious metals IRAs. By pushing back RMDs, investors can get extra time to grow their retirement accounts without any penalty. And even if no RMD is taken, the penalty reduction is significantly less than in the past.
Increase to “catch-up” limits
Currently, the US government allows those who are 50 or older to make catch-up contributions to their retirement accounts. These catch-up contributions serve as a way for older workers to make additional contributions to their retirement accounts that exceed the standard limit. The new laws, if passed, would take effect in 2023 and change the catch-up contribution limits accordingly:
|Type of account||Current yearly catch-up limit||Newly proposed limit under SECURE Act 2.0|
|401k and 403b||$6,500||$10,000 (age 62-64)|
|SIMPLE||$3,000||$5,000 (age 62-64)|
|IRAs||$1,000||No change, but adjusted for inflation|
This change would allow investors to inject more capital into their retirement accounts as their working years are winding down. This means more investment in your Gold IRA or other precious metals IRAs.
New Roth options
Currently, there are limitations to Roth IRA accounts that don’t allow those using SEP and SIMPLE retirement accounts to utilize the after-tax contributions. If the SECURE Act 2.0 is passed, this would all change and allow both SEP and SIMPLE account owners to make after-tax contributions to a Roth IRA. Adding to this benefit, employer matching programs would be available under this proposed law as well.
Tax-free contributions to a precious metals IRA? Yes, please!
Automatic enrollment and tax incentives
If passed, employees would now be automatically enrolled into eligible 401k, 403b, or SIMPLE plans starting at 3% of their annual salary. Contributions would increase by 1% each year up to 10%. But don’t worry about your employer; they could get twice the tax credit for offering a retirement plan. Businesses with less than 50 employees will see their tax credit double, from 50% to 100% of the plan’s startup costs, for three years.
This type of forced savings would mean more people will automatically be saving for retirement. It also creates the opportunity for rollover options into precious metals IRAs through self-directed IRAs (SDIRAs) that give savers more control over their retirement investments.
More leniency on admin errors
Sometimes it’s challenging to keep track of retirement savings and contributions. If you happen to make an error on your retirement account, the SECURE Act 2.0 will give you more time to fix it. The bill would allow you to correct any administrative errors within 9.5 months of the year they are made. This doesn’t just go for individuals but for businesses offering retirement plans as well.
Remove the 25% cap on QLACs
A qualified longevity annuity contract — or QLAC — is a type of annuity with investment from a retirement plan. This financial contract is used by those who want a steady income stream as they get older into their retirement years. At the moment, the maximum contribution to a QLAC is 25% of retirement savings, or $135,000, whichever is smaller. As proposed, The SECURE Act 2.0 will remove the 25% cap from QLACs and increase the maximum contribution to $200,000 if it is passed. It would also broaden the scope of QLACs to include ETFs as investment options.
Employer matching contributions for those paying student loans
Student loan debt is holding back millions of Americans from saving for retirement. Currently, those making student loan payments may struggle to benefit from 401k match programs from their employers. Congress seemingly recognizes how difficult saving can be for these individuals. As proposed, the upcoming regulatory change would allow employers to make contributions to a 401k plan as their employees pay off student loan debt. Employers would be “matching” the student loan payments made by the employee.
Once again, more money in retirement plans means more potential rollover options for precious metals IRAs. Birch Gold Group provides a path for savers at any point in their working life to rollover their 401k into a precious metals IRA to purchase gold, silver, and other precious metals directly.
What comes next?
While the SECURE Act 2.0 isn’t yet officially completed, it has garnered significant support in Congress. The House Ways and Means Committee unanimously passed the bill, and it will now make its way to the House floor for a vote. As for the Senate, one source claims that the bill could be voted on as early as July. And while the SECURE Act 2.0 may get changed slightly along the way, it appears there is significant support for the bill through Congress, and many expect these changes to be approved sometime in 2021.