Johney
Pineapple King
Don't be a hater because you're too scared.
Scratching head...
- Thread starter BeachBoy
- Start date
I'm not afraid I'm being realistic
Johney
Pineapple King
burrheadd
KING Of GIFS
Just getting them ready for when they nix the pension
You know the company wants that
Thebrownblob
Well-Known Member
So do some of the knuckleheads we work with!
The same ones that don't have a 401k plan?
Thebrownblob
Well-Known Member
Lol I didn’t say that was smart
That extra money is definitely worth it for many.
Red Headed Stranger
Well-Known Member
This was part of Biden's Secure 2.0 Act which requires auto enrollment in 401(k) plans. A letter was sent out by either UPS or the union (can't remember which) and you had the ability to opt out of it if you wanted to. You can still change your withholding to zero after the fact, but you might find it worthwhile to be putting some additional money away so you can have a good retirement.
The Secure 2.0 Act had 7 key changes:
1. Require auto enrollment in 401(k) plans
Most employers starting new workplace retirement savings plans will be required to automatically enroll employees in the plan. (It is currently optional for employers to do so.) It will then be up to employees to actively opt out if they don’t wish to participate.This Secure 2.0 provision will require employers to set a default contribution rate of at least 3% but not more than 10% for the employee plus an automatic contribution escalation of 1% per year up to a maximum contribution rate of at least 10% but not more than 15%.
2. Allow employer contributions for student loan payments
When you have to pay down student loan debt, it makes it harder to save for retirement. Secure 2.0 now lets employers make a matching contribution to an employee’s retirement plan based on their qualified student loan payments. That would ensure the employee is building retirement savings no matter what.
The provision is set to take effect after December 31, 2023.
3. Increase the age for required minimum distributions
It used to be that when you turned 70 1/2, you had to start withdrawing a required minimum amount from your 401(k) or IRA every year. Then, the age moved up to 72. Under the Secure 2.0 package, it will move up to 73 starting in 2023 and then to 75 a decade later.4. Help employees build and access emergency savings
Here's what's in the $1.7 trillion federal spending bill
Normally, if you tap your 401(k) before age 59 1/2, you must not only pay taxes on that money but also pay a 10% early withdrawal penalty.
For employees dissuaded from saving money in a tax-deferred retirement plan because it would be too complicated and costly to access for emergencies, Secure 2.0 may assuage that fear: It will let employees make a penalty-free withdrawal of up to $1,000 a year for emergencies. While employees would still owe income tax on that withdrawal in the year it’s made, they could get that tax refunded if they repay the withdrawal within three years.
If they don’t repay the withdrawal, they would have to wait until the three-year repayment period ends before being allowed to make another emergency withdrawal.
The provision will go into effect after December 31, 2023.
5. Raise catch-up contribution limits for older workers
Currently, if you’re 50 or older, you may contribute an additional $6,500 to your 401(k) on top of the $20,500 annual federal limit in effect this year.Under the retirement package, instead of $6,500, those aged 60, 61, 62 and 63 will be allowed to contribute $10,000 or 50% more than the regular catch-up amount in 2025, whichever is greater.
The provision takes effect after December 31, 2024.
To help pay for the cost of the retirement package, however, another provision, which will go into effect a year earlier, will require anyone with compensation over $145,000 to “Rothify” their catch-up contributions. So, instead of making before-tax contributions up to the catch-up limit, you may still contribute the same amount but you will be taxed on it in the same year. Your contribution will then grow tax free and may be withdrawn tax free in retirement. But the federal government will get the tax revenue from the original catch-up contribution up front.
6. Enhance and simplify the Saver’s Credit
An underutilized federal match exists for lower-income earners’ retirement contributions of up to $2,000 a year. The new package enhances and simplifies the so-called Saver’s Credit so more people can use it. Eligible filers (e.g., married couples making $71,000 or less) will get a matching contribution from the federal government worth up to 50% of their savings, but the match cannot exceed $1,000.The provision goes into effect after December 31, 2026.
7. Make it easier for part-time workers to save
Part-time workers currently must be allowed to participate in a workplace retirement plan if they have three years of service and work at least 500 hours a year. The new package reduces that service time to two years.The provision takes effect after December 31, 2024.
Time versus money
Similar threads
