The bill would make saving for retirement a little easier, for feds and those in the private sector.
Introduced to Congress by Massachusetts Representative Richard Neal, the “Securing a Strong Retirement Act” was passed by the House of Representatives and is on its way to the Senate for consideration. The bill, HR-2954, is colloquially being called “SECURE Act 2.0.” The SECURE Act, which became law at the beginning of 2020, made several improvements, allowing Americans to save more for retirement and pushing the RMD (required minimum distribution) age from 70½ to 72.
The newest act that is heading to the Senate, would continue increasing the RMD age. Next year, the age would go from 72 to 73, then increase again to 74 in 2030, and then once more in 2033- to age 75. Another important component of the act revolves around catch-up contributions, which are deposits to IRAs and 401(k) accounts (plus the TSP) that are over the normal limit, allowable for those aged 50 and older. If signed into law, the bill would make it so all catch-up contributions would have to be Roth contributions. While these contributions would be taxed out of the gate, there would be no RMD or further tax when the retirement savings are eventually withdrawn from a Roth account. In addition to this, the catch-up contribution limit would increase to $10,000 from ages 62 to 64. (The catch-up limit for 2022 is $6500.)
The TSP’s overseeing body, the Federal Retirement Thrift Investment Board (FRTIB), is currently coordinating with Senators over one issue. If the bill were to become law, it mandates that some of the new retirement rules are to be implemented shortly after passage. As the TSP is set to implement significant changes to its online system starting in May, a sudden change to RMD or catch-up rules could cause some headaches for the TSP, depending on if and when the bill is passed. Govtrack.us currently gives HR-2954 a 20% chance of passing.
Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.