HR 2954 Retirement Savings Bill

The House recently passed a bill and sent it to the Senate relating to retirement. I am excited about the bill because it addresses systemic issues facing working Americans’ retirement and education financing. Americans have too little in their savings when they retire and struggle with college debt, putting off more and more of their aspirations. While the bill is packed with provisions, I am most focused on reforms at the start and end of retirement.

The most common things I hear from adults in my age bracket who are also struggling with student loans are how can I save with all this debt, and how does a 401k work? This bill handles both of these with a few simple changes.

1) The bill pushes auto-enrollment for retirement funds.
2) Increases credits for small businesses and part-time employers to incentivize and increase access to retirement plans.
3) Allows employers to pay into retirement accounts as student loan debt holders pay down their debt.
4) Establish a clearinghouse to track and consolidate existing retirement plans.
5) Streamlines SAVERS credit for low-income Americans trying to save.

These are all great as they allow young Americans and or part-time workers to begin saving. Studies have shown that when people have access to a retirement fund and are auto-enrolled, they are more likely to stay enrolled. The importance of opening a retirement plan is compounding interest. The median student loan payment is $222.00 if invested from age 21 to 65 (assuming a 6% return, less than most index funds included in retirement plans) you would have 532,135.40 in retirement coupled with social security that is well above what is needed. If passed, this is great for young Americans and one of the best ways to help young Americans.

The other focus of the bill is increasing the contribution amounts for those closing in on retirement age and increasing the age of mandatory retirement distributions from 72 to 75. These changes allow more time for older Americans to prep for retirement. I am optimistic about this bill passing and if passed this will be a win for all Americans and decrease the stress on everyone.

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