Yahoo Finance 9 Ways Retirement Has Changed Since Biden Won the 2020 Election
In 2020, the pandemic and President Biden’s election brought societal, economic and legislative changes that shepherded the country’s retirement landscape from the pre-COVID era into the realities of post-pandemic America.
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The changes touched everything from contributions and taxes to Social Security and RMD penalties. Here’s how the Biden years have changed the state of retirement in America.
Also see what a Biden win in 2024 would mean for your retirement savings.
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Social Security Recipients Got Their Biggest Raise in Decades
Since 1975, the law has required an annual cost-of-living adjustment (COLA) for Social Security to ensure benefits keep pace with inflation. In 2022, inflation hit its highest rate since the early 1980s, leading to a COLA that gave beneficiaries a raise not seen in 40 years.
“One significant development has been the increase in Social Security COLAs, with a notable 8.7% rise in 2023 — the largest adjustment in decades,” said Ben Klesinger, co-founder and CEO of Reliant Insurance Group and Helping Hand Financial. “This increment has been crucial for retirees coping with inflation.”
In 2022, beneficiaries received a 5.9% bump. In 2021, it was just 1.3%. This year, as inflation waned, recipients saw their checks grow by 3.2%.
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Retirees Got an Extra Year To Put Off RMDs
President Biden signed major legislation at the end of 2022 that ushered in sweeping changes to the retirement landscape.
“The SECURE Act 2.0 has brought noteworthy changes to retirement planning,” said Marty Burbank, an estate planning and elder law expert and founder of OC Elder Law in Orange County, California. “It has extended the age for required minimum distributions (RMDs) from 72 to 73, which allows retirees more time to grow their investments and engage in strategic tax planning.”
The age will increase to 75 in 2033.
Contribution Thresholds and RMD Penalties and Requirements Changed
Thanks to Secure 2.0, the penalty for missing an RMD was cut in half from 50% of the RMD to 25%. If corrected in a timely fashion, the penalty drops to 10%.
As of 2024, Roth accounts in employer retirement plans are no longer subject to RMDs.
“Additionally, contribution limits for 401(k)s and IRAs have been increased, along with enhanced catch-up contributions for those aged 50 and above,” Burbank said.
Also, the legislation allows holders of defined contribution retirement plans to add emergency savings accounts to Roth accounts.
Savers Can Take Penalty-Free Emergency COVID Withdrawals
The expensive treatments, missed work and long recoveries associated with COVID-19 spurred pandemic relief legislation that gave people more flexibility to tap their own funds.
“Another key legislative change has been the introduction of penalty-free early withdrawals up to $100,000 from retirement accounts for individuals impacted by COVID-19, as seen in the CARES Act,” Burbank said, in reference to the 2020 Coronavirus Aid, Relief, and Economic Security Act. “This provision has provided essential liquidity for many during uncertain times.”
Automatic Enrollment Becomes Mandatory
One of the most consequential elements of the Secure 2.0 Act is a provision that will require employer-based retirement plans to auto-enroll eligible employees starting in 2025. According to Kiplinger, auto enrollment dramatically increases retirement plan participation.
Companies Can Contribute Student Loan Matches
The Secure 2.0 Act also includes a provision that allows employers to make matching contributions to retirement plans that go toward student loan payments. Student loan payments resumed in the fall of 2023 when the Supreme Court struck down President Biden’s student debt forgiveness plan, and the employer match provision is designed to mitigate the burden that college debt places on saving for retirement.
Tax Credits for Small Businesses
The Secure 2.0 Act also made it easier for businesses to offer their employees retirement benefits.
“Changes in Congressional budgeting, such as enhanced tax credits for small businesses initiating retirement plans, have further encouraged broader workplace participation in retirement savings,” Blain said.
Businesses with 100 or fewer employees who received at least $5,000 in compensation the year before might be eligible for a tax credit of up to $5,000 for three years to help start a 401(k) or similar qualified plan, a SEP or SIMPLE IRA.
You Can Roll Over 529 Assets Into Roth IRAs
The Secure 2.0 Act stipulates that in some cases, with many qualifying criteria, savers might be able to roll over unused assets in a 529 college fund into a Roth IRA. The account must be at least 15 years old and both accounts must be in the same name.
The Saver’s Match Offers Federal Contributions
Starting in 2027, the SECURE 2.0 Act replaces the nonrefundable Saver’s Credit with what’s called a “Saver’s Match” — a federal match of 50% of IRA or retirement plan contributions up to $2,000 per person, although income limits and phase-outs apply.
It replaces the nonrefundable Saver’s Credit.
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