Many changes have occurred so far this year, ranging from student loan forbearance, additional child tax credits, employee retention credits, and more. With just a few remaining months in 2021, now is a good time to look forward to additional changes that could be coming either by the end of the year or in 2022.
Another Secure Act?
The Secure Act was passed in 2019 and brought with it a slew of changes to retirement accounts aimed at making saving for retirement easier than ever. As a brief recap, the Secure Act of 2019 made it easier for business owners to set up and administer retirement plans. It also pushed the required minimum distribution age to 72 (from 70½). This legislation also required that anyone inheriting an IRA or Roth IRA that is not a spouse has to empty the account within 10 years.
The new legislation, currently called the Retirement Security and Savings Act, is being dubbed the “Secure Act 2.0.” It will look to push the RMD age to 75, even further than the 72 that was made in the Secure Act. Currently, “catch-up” contributions for those age 50 and older means that an additional $6,500 can be contributed to a 401(k) plan. Under the Secure Act 2.0, workers aged 62-64 would be able to contribute an additional $3,500 (for a total of $10,000 of catch up contributions).
One of the more interesting provisions in the Secure Act 2.0 is one that allows employers to make matching 401(k) contributions directly towards the employee’s student loans, rather than contributions being added to the employees 401(k) as they are now. Lawmakers are hoping that this would encourage younger employees to participate in retirement accounts at rates higher than we are currently seeing. Although this would be one of the largest changes to retirement plans, it also is the piece least likely to make it into the final bill.
Student Loan Forgiveness
Last week, President Biden extended federal student loan forbearance until January 2022. One important note is that the Department of Education intentionally stated that this would be the final extension of student loan forbearance. Before that deadline next year, most Democrats are attempting to pass legislation that would forgive at least a portion of student loans.
At this stage, there is not a specific bill looking to get passed, but more likely will be something pushed later in the year. Early numbers have estimated that each borrower would receive $10,000-$50,000 in forgiveness depending on what the final bill is decided on, and potentially depending on income.
Additional Child Tax Credit
As outlined in our three part series (which you can read part one here, part two here, and part three here), the child tax credit was dramatically increased this year, giving an additional $1,000-$1,600 per child to eligible taxpayers. When this was originally passed in the American Rescue Plan, it was only for a one year period. Since then, the House and Senate have both been keen on making this change permanent, along with the monthly payments that have also been introduced this year.
Although there is interest in this area, the lack of proposals points to the fact that this legislation may come soon, though not by the end of the year.
As we have outlined before, the cost of healthcare in retirement can be tricky to navigate. A common misconception is that most of a retiree’s expenses will be covered through Medicare in retirement.
To provide aid, Congress recently proposed a budget bill that would give more benefits to retirees. The current proposal will provide dental, vision, and hearing benefits. According to the Kaiser Family Foundation, almost half of all Medicare beneficiaries do not have dental coverage (47%), and a similar amount of people (47%) have not been to the dentist in the past year. (1)
In addition, some members of Congress as well as President Biden have expressed concern about the age of Medicare beginning too late. There have been talks about lowering the starting age of Medicare to 60, though whether that will be included in this legislation remains to be seen.
Though all we may have now is proposals and discussion points, it is important to have an outward perspective when handling your financial future. Nearly all taxpayers would be affected in some way, whether you are currently retired and may need to take distributions from your IRA, you are retiring soon and need to calculate the cost of health insurance, or you are younger and have some student loan debt or children. If you have any questions about any of these proposals or any other concerns, click here to set up a 20 minute discovery call.
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