Congress is actively seeking ways to encourage more small businesses to use retirement savings plans. That’s a good thing for America’s savers. But be wary that the bill may also encourage greater use of annuities, which I have warned readers about repeatedly (see here, here, and here for a sample). The bill will also encourage greater use of 401(k)s, which like annuities, can also come bearing hefty fees. For many savers too, borrowing against the money in their 401(k) account can be a tempting but risky option.
Richard Rubin and Anne Tergesen report on the bill in The Wall Street Journal:
Lawmakers are starting with a bipartisan bill that would encourage more small employers to offer retirement savings plans and make it easier for companies to offer annuities that turn workers’ savings into a guaranteed annual income. If passed, the measures would comprise the most significant alterations to 401(k) plans since 2006, when Congress made it easier for employers to enroll workers automatically and invest money in funds that shift focus from stocks to bonds as people age.
The bill, known as the Retirement Enhancement and Savings Act, or RESA, faces a slim congressional election-year calendar and partisan tensions over tax policy. However, the bill has garnered support from financial services companies and AARP, the advocacy group for older Americans, which says “RESA is an important step to improving retirement policy.”
“It is something that could actually move the needle on retirement security,” said Michael Kreps, a principal at Groom Law Group, who represents financial services companies and 401(k) plan sponsors.
In the Senate, RESA is sponsored by the Finance Committee’s chairman, Orrin Hatch (R., Utah), and its top Democrat, Ron Wyden of Oregon. The Finance Committee unanimously approved a version of RESA in 2016, though it hasn’t advanced beyond that stage.
Saving more of your money is almost universally a good thing for your future. But you need to be aware of the possible changes in retirement savings law coming your way, and be prepared to fully investigate any investment products your employer may offer you.
E.J. Smith - Your Survival Guy
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