Understanding the 401(k) Retirement Changes for 2023
New year, new… 401(k) Retirement Changes? That’s right; if you have a 401(k) to save for retirement, a few major changes are happening this year that you need to know about. Luckily, we have compiled them all for you right here. Keep reading to learn more about the 401(k) retirement changes for 2023 and how to start saving for retirement with gold.
What Are The 401(k) Retirement Changes?
According to Forbes, the $1.7 trillion dollar spending bill that Congress passed includes several significant changes to retirement plans that could help Americans keep their pensions untaxed and untouched for longer.
Key facts include:
- The bill will change the age at which Americans are required to withdraw from tax-deferred retirement accounts: raising the age to 75 from 72, and will increase contribution limits for older workers, and hopefully incentivize low to moderate wage workers to save in retirement accounts.
- The age limit — known as required minimum distributions (RMD)—increases from 72 to 73 on January 1, 2023, and then to 75 on January 1, 2033.
- The changes to the age are meant to reward taxpayers who have to work as they get older. The mandatory distributions are to ensure a portion of the retirement savings are spent during one’s lifetime and make the money tax-deferred but not tax-free, reports The Wall Street Journal.
According to CNN, the retirement savings provisions in that package are known as Secure 2.0. And there are seven of the Secure 2.0 provisions, based on a breakdown from the Senate Finance Committee.
- Require auto-enrollment in 401(k) plans – The provision will go into effect after December 31, 2024.
- Allow employer contributions for student loan payments – The provision is set to take effect after December 31, 2023.
- Increase the age for required minimum distributions
- Help employees build and access emergency savings – The provision will go into effect after December 31, 2023.
- Raise catch-up contribution limits for older workers – The provision takes effect after December 31, 2024.
- Enhance and simplify the Saver’s Credit – The provision goes into effect after December 31, 2026.
- Make it easier for part-time workers to save – The provision takes effect after December 31, 2024.
Background of the Spending Bill
The changes to the 401(k) retirement plan were a bipartisan effort by the Senate Finance Committee and are an expansion of a 2019 Secure Act, according to Forbes. The previous bill removed the age cap Americans would be able to contribute to traditional IRAs and also incentivized workers to let their employers automatically raise an employee’s annual savings rate to 15% of annual earnings, a bump from the previous 10% cap. The sudden rush to change retirement plans in recent years is meant to combat the financial shape Americans are finding themselves in, as this generation is reaching retirement age not seeing any rise in their median incomes and social security in years, becoming the least prepared in decades, reports The Wall Street Journal.
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