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There\u2019s a potential game-changer being discussed when it comes to retirement savings. It\u2019s called SECURE Act 2.0 (Setting Every Community Up for Retirement Enhancement Act), and it\u2019s intended to help more Americans ensure they\u2019ll have enough money during their retirement. The new measures of the SECURE Act 2.0 are designed to boost retirement savings, but some changes will be a bit difficult to put into place.<\/p>\n
Under SECURE Act 2.0, employers that offer\u00a0defined-contribution plans\u00a0such as\u00a0401(k)s\u00a0would be required to enroll eligible new employees automatically. Those employees would be enrolled at a contribution rate of 3%, similar to how many 401(k) plans operate now. But the annual contribution level would automatically be increased by 1% each year, maxing out at 15% of employee pay unless employees choose a different contribution rate.<\/p>\n
Employer-sponsored 401(k) plans have annual contribution limits, with separate\u00a0catch-up contribution limits\u00a0allowed for savers aged 50 and older. For 2021, the regular contribution limit is $19,500, while the catch-up contribution limit is an additional $6,500. SECURE Act 2.0 would introduce another catch-up contribution limit just for people aged 62 to 64. The limit, which would take effect in 2023, would allow those savers to add another $10,000 in catch-up contributions to their 401(k)s each year. The Act would also make all catch-up contributions subject to Roth guidelines for tax purposes.<\/p>\n