Rebalancing Act – Could SECURE 2.0 Get Citizens’ Retirement Plans Back on Track?

Rebalancing Act – Could SECURE 2.0 Get Citizens’ Retirement Plans Back on Track?

I admit to being grumpy, habitually expecting the worse.

Once bitten, twice shy, and in my case, life’s covered me in toothmarks.

On July 19, Cavalier ran my piece, SECURE Act 2.0 – Are There Angels in the Details? I examined the legislation as it now sits; considered the angles, the angels and devils in detail; and laid down my vigorous assessment: “I’m hoping for the best.”

The folks back home in Massachusetts must think: he’s been dropped on his noggin. For Pete’s sake – the kid’s gone giddy.

My atypical optimism may be panning out. Launched last November, 2.0 has bipartisan support. In the usual ways and means of things, there are two bills, one each in House and Senate. The House’s bill escaped committee first and seems closer to a vote. If the legislation passes, and I’d bet your breakfast it will, the president seems unwaveringly determined to sign it.

Win one for working Americans who are planning for retirement, and more pointedly, for those who are not. Even Congress can recognize a retirement planning crisis when they see it: we citizen-taxpayers are not setting enough aside, or in many cases, anything at all, for retirement.

I see two fundamental reasons for this crisis. The first is behavioral: saving and investing are no fun, until you get hooked on the habit. It’s like exercising. As Jack, my annoyingly fit, know-it-all friend in Christchurch once said: there’s two kinds of pain – the kind you get from not exercising, and the kind you get from exercising; you can choose.

Choose ‘exercise’ – in my case, simple stretches pass muster – and you get better mobility, easier breathing, the ability to sit longer at some cursed desk, earning your keep and your joy. A simpler, truer way to express it: you take control of your aches, learn to assuage them, and let time reduce their burden. Yes, it’s just like saving for retirement.

The second problem is availability. If I can’t get to the gym, and you can bet your last chocolate I never do, there’s always wall push-ups for neck, back and arms; a half-submerged stroll in the pool, a cool stand-in for dreary treadmill. Alas, the metaphor dies in the case of retirement planning: if your employer freezes you out of their 401(k) plan, because you’re parttime, half-time, a consultant or freelancer, you’re kicked out of the pool and shipped up the creek.

That’s nowadays. If SECURE 2.0 becomes law, doors would open. Congress seems to have jerked out of its reverie, and noticed how postmodern America works. Many of us have multiple jobs, with no single, steady employer. Two-point-oh could open retirement planning opportunities for us to prepare for the blessed day when we rise from our desktop, never again to sit in that backbreaking chair. These last words nearly made me smile, just for once.

The bill’s key provision, I think, is automatic enrollment. Employers now offer the option for new employees to join their retirement plans, with the workers usually paying in 3% of their salary. Plenty of workers, cash strapped, maybe suspicious of the boss man’s motives, refuse.

SECURE 2.0 would require employers that offer plans to automatically enrol eligible new employees at that 3% contribution level. This percentage would top-up in 1% increments per year to 10%. Employees could opt out or pay a different amount, if they choose. But by starting out ‘in’, it’s hoped the wisdom of participating would sink in fast – especially when employees notice the company is matching their contributions.

Current retirement schemes wouldn’t be affected: the new rules would apply to new offerings. The bill’s sponsors hope that a ‘new normal’ of retirement saving would grow and be noticed by ‘outsiders’, encouraging them to jump on the trend by joining their employer’s plans.

The draft law also holds provisions to expand the saver’s credit, lift the catch-up contribution limit, help those burdened with student loans to get started into saving, and more. No one can expect unfailing success in life, but we surely can demand a fair chance to try, I often say. It looks like 2.0 could provide a multitude of fresh chances for all of those people who want them.

Another winner: the retirement planning industry. Workers will need advice on how to structure their plans and allocate funding. Investment is intoxicating and the savory taste of a simple 401(k) or IRA could educate the palate for savors yet richer. And if people start saving sooner, planners won’t need to play risky, as they sometimes must do today to make up for lost time.

Napoleon said: ground I can recover; time – never. If only he’d gone into retirement planning – founded it, even – instead of getting folks shot, my blessed Moscow burned down… aha, I’m getting cranky again, what relief!

SECURE 2.0 builds on Trump-era legislation and was proposed during his regime. Democrats cosponsor the bill, are lining up to vote ‘yea’; their Republican foes stand with them shoulder-to-shoulder. An exotic spectacle, I’ll wager, to youthful observers in the Congressional gallery. What is going on?

Older onlookers may wonder: are we back in the happy times of political trench war, when agendas advanced, citizens were served? Are the knee-jerk days of obstruction now receding? Steady me, readers, I’m feeling woozy. This hopeful thinking seems to be thinning – nay, purifying – my bitter, coagulated blood.

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