Labor & Employment / 05.31.2019

SECURE Your Future: New Legislation Could Make It Easier For You!

by Rob Gilmore and Kirsten Mooney

“There is no tragedy in growing old, but there is tragedy in growing old without means of support.” – Franklin D. Roosevelt, 32nd President of the United States

It comes as no surprise that recent studies have shown Americans saving less and less for retirement. Many Americans are a few years – or more – behind where experts believe they should be. Perhaps that has to do with the significant (and rising!) household expenses, or impossible student loan debt or maybe even that Americans do not know how to save for retirement. Whatever the reason, Americans are behind the ball.

Here are a few shocking statistics about Americans’ retirement savings:

  • 1 in 3 Americans have less than $5,000 in retirement savings and 21% of Americans have no retirement savings at all. This means when they do begin saving, they will need to set aside larger portions of income each month to have enough for retirement. Alternatively, they may need to stay in the workforce even longer to compensate.
  • The median household retirement savings is $50,000. The number is higher for Baby Boomers (with a median of $152,000), Gen Xers (with a median of $66,000), and Millennials bring up the rear at $23,000. But, keep in mind, Millennials also have the most time left to save before retirement.
  • Americans are leaving approximately $24 billion in unclaimed 401(k) matches on the table. According to a Financial Engines survey, the typical employee misses out on $1,336 of 401(k) matches each year, which could amount to nearly $43,000 (with compounding) over 20 years.
  • 29% of Americans have taken early withdrawals from their retirement savings accounts, incurring additional penalties. When financial emergencies occur or times get tough, nearly 3 out of 10 Americans will dip into their retirement savings.
  • Barely half of the workforce (51%) is covered by a retirement savings plan through their employer or union. Access to coverage varies by demographics, education, type of employment, and employer size.

Experts say that it costs over $1 million dollars to retire at age 65. Are you expecting to be a millionaire in your mid-60s?

If you’re like the average American, whose answer is absolutely not, there may be good news for you. A proverbial light at the end of the tunnel.

On May 23, 2019, the U.S. House of Representatives voted 417 to 3 to pass H.R Bill 1994, the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The Bill is widely expected to make it through the U.S. Senate during the current term. This is the first real major retirement legislation since the Pension Protection Act in 2006. The SECURE Act was drafted with the intent to get Americans to save more for future retirement, and includes a number of provisions that make it easier for employees to save money. Below are some of the key provisions of the Act:

  1. Repeals the prohibition on contributions to a traditional IRA by an individual who has reached age 70½ years-old, allowing for those older Americans who work longer to continue to contribute.
  2. Increases the required minimum distribution age for retirement accounts to 72-years-old based on increased life expectancy of Americans.
  3. Allows long-term, part-time workers to participate in 401(k) plans.
  4. Parents can withdraw up to $5,000 from retirement plans, penalty-free, within a year for any “qualified birth or adoption distributions.”
  5. Expands 529 education savings accounts to cover costs associated with registered apprenticeships; homeschooling; up to $10,000 of qualified student loan repayments; and private elementary, secondary, or religious schools.

Essentially, the SECURE Act presents a rare bipartisan opportunity for the government to help repair the crippling state of retirement savings for many Americans. After decades of hard work and savings, it would be a real tragedy for Americans to experience growing old with little to no retirement savings for support.

For more information contact Robert Gilmore at rsg@kjk.com or 216.736.7240, or Kirsten Mooney at kbm@kjk.com or 216.736.7239, or any of our KJK Labor & Employment practice group members.

 

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