As Congress continues to make progress on the formulation of the Securing a Strong Retirement Act of 2022 (SECURE 2.0), priority must be focused on boosting the retirement income of Americans, boosting emergency savings levels across the country and keeping low-earners in mind as legislation is refined. This is according to staffers at the Bipartisan Policy Center (BPC) in a late August blog post.
“With three iterations of SECURE 2.0 at various stages of the legislative process (passed on the House floor in March and advanced by the Senate Committee on Finance and the Senate Committee on Health, Education, Labor, and Pensions in June), lawmakers must make consequential decisions about the final bill. Here is what they should keep in mind,” the post reads.
One such priority must be focused on expanding retirement savings, which the legislation will aim to do through the closure of certain coverage gaps and the expansion of incentives for employers to offer retirement plans. Currently, there is a dearth of private-sector employees who offer retirement savings plans to their employees, the post explains.
Another key feature of legislation aimed at expanding retirement savings is centered on the expansion of automatic enrollment in such plans.
“Increasing the use of automatic enrollment and automatic escalation would also amplify the benefits of expanding access to retirement plans,” the post says. “Notably, only the House version of SECURE 2.0 currently includes the most impactful of such provisions, requiring most new retirement plans to automatically enroll eligible participants and automatically increase contributions by one percentage point (up to 10% of wages) annually.”
In regards to emergency savings, insufficient portions of American workers find themselves able to absorb the cost of some kind of unexpected emergency expense, with over a third of people (34%) unable to adequately afford such an expense of $500 or less according to BPC research.
“Moreover, adequate emergency savings are an important buffer against early withdrawals from retirement savings when unexpected expenses arise,” the post reads. “The Senate HELP Committee’s bill would permit employers to automatically enroll employees into emergency savings accounts that could hold up to $2,500 of post-tax contributions to be accessed at least once a month. Employees could opt out or adjust their contribution rate at any time.”
BPC staff has previously related to RMD that reverse mortgages and home equity could be critical components to stabilizing the American retirement landscape.
“Broadly speaking, home equity is one of the largest assets held by older Americans, yet it’s being criminally underutilized for retirement security,” said Shai Akabas, BPC director of economic policy in a 2021 interview with RMD. “There is legitimate debate about whether the current iteration of reverse mortgages is the right key to unlock home equity in retirement, but we need policymakers and the private sector to be working together to tackle this challenge.”
Read the post at the BPC website.