Smart Money: Retirement Changes You May Have Missed
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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. 

In this week’s episode, we discuss the newest changes to retirement benefits and what it means for you.

Check out this episode on any of these platforms:

Our take

Congress passed a $1.7 trillion bill to avoid a government shutdown right before the holidays that included some key changes to retirement benefits that will be felt for years to come. 

The provision, called Secure 2.0, will mostly affect Americans who have a retirement account through their employer. And the bulk of the changes will impact older Americans who are already financially secure. Here are some of the highlights of Secure 2.0 that will roll out over the next few years: 

  • Employers can count an employee’s student loan payments when matching retirement funds in an employer-sponsored 401(k). Begins 2024.
  • The age you must withdraw money from a retirement savings account is pushed back to 73. Begins 2023.
  • Savers can withdraw up to $1,000 from their 401(k) and IRA accounts, penalty-free, to cover certain financial emergencies. Begins 2024. 
  • Those with 529 educational savings accounts can roll over some funds into a Roth IRA account — up to $35,000 in their lifetime. Begins 2024. 
  • Employers start automatically enrolling workers into any new employer-sponsored retirement plans and employer-sponsored emergency savings accounts. Both begin 2025

In 2023, there are additional savings account changes coming, including maximum annual contributions and health savings accounts limits. Retirees are also set to receive long-awaited boosts in the form of a higher cost-of-living adjustment for Social Security, as well as cheaper premiums and deductibles for Medicare Part B.

Have a money question? Text or call us at 901-730-6373. Or you can email us at podcast@nerdwallet.com. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: You might have missed it at the end of last year, but Congress passed some pretty notable changes to how you can save for retirement, including one change that will make student loan payments count toward retirement contributions. In this Money News episode of Smart Money, we will give you the rundown.

Anna Helhoski: Welcome to the NerdWallet Smart Money podcast, where you send us your money questions and we answer them with the help of our genius Nerds. I'm Anna Helhoski.

Sean Pyles: And I'm Sean Pyles. If you have a money question for the Nerds, call or text us on the Nerd hotline at 901-730-6373, that's 901-730-NERD, or email us at podcast@nerdwallet.com.

Anna Helhoski: Follow us wherever you get your podcasts to get new episodes in your feed every Monday. And if you like what you hear, leave us a review.

Sean Pyles: Anna, as I said at the outset, a lot of folks might have missed the many changes coming to retirement accounts that were approved by Congress at the end of last year. Can you tell our listeners what's going on?

Anna Helhoski: Sure. If you're anything like me, you might have been a tad checked out right before the holidays, so you too might have missed the details on the sprawling federal spending package that passed just before that. The $1.7 trillion bill passed pretty quickly in order to avoid a government shutdown. It also includes a provision that will directly impact millions of Americans in the coming years.

Sean Pyles: The provision is known as Secure 2.0 and it brings a lot of changes to how folks can save for retirement, though we should note that many of these changes take effect over the coming years. Here's what Secure 2.0 will do for savings. One big change is that starting in 2024, employers can base 401(k) matches on a worker's student loan payments. Borrowers with student loan debt often report not being able to contribute to their 401(k)s at work because of their debt. Secure 2.0 gives employers the option of counting an employee's student loan payments when the employer puts matching funds in their retirement plan.

Anna Helhoski: That's pretty remarkable, and student loan borrowers definitely will want to take advantage of that when they can. Secure 2.0 also pushes back the age when you have to start withdrawing money from IRAs, 401(k)s, and most other retirement savings accounts. The age was already pushed back from 70 and a half to 72 in previous legislation. This year it moves from 72 to age 73. By 2033, for people born in 1960 and later, it'll be age 75.

Sean Pyles: This update exemplifies some of the critique around the retirement changes, namely that a lot of the benefits are going to those who are wealthier and older.

Anna Helhoski: Right, and that's very true, and people who also will already be able to access retirement benefits.

Sean Pyles: But there is some good news for regular folks. Next year, people will be able to withdraw up to $1,000 from their 401(k) and IRA accounts to cover certain financial emergencies without having to pay a penalty. Usually you have to pay a 10% fine on withdrawing from these types of accounts prematurely. One catch is that the money needs to be paid back within three years if you want to make another penalty free emergency withdrawal.

Anna Helhoski: In the past year, we've seen consumer savings rates take a nosedive, so this could provide a much needed lifeline to help people cover emergency expenses without going into costly credit card debt. Also next year, people with money left over in a 529 educational savings account will be able to roll over at least some of it into a Roth IRA account. Beneficiaries of these accounts will be able to roll over up to $35,000 in their lifetimes.

Sean Pyles: And here's one of the most significant changes in how people sign up for retirement accounts. In 2025, automatic enrollment will go into effect for newly established retirement plans. That means workers whose employers launch a 401(k) or 403(b) retirement account will be automatically enrolled into those plans. Employers can also automatically enroll workers into emergency savings accounts, which will operate similarly to retirement savings accounts.

Anna Helhoski: We've just run through a number of changes to how folks can save for and spend their retirement savings, and we haven't even covered every change coming. This is good news for workers whose employers provide retirement plans. Unfortunately, many workers don't, and the Secure 2.0 Act doesn't help them.

Sean Pyles: But beyond what passed at the end of 2022, the new year also ushered in a number of changes to retirement accounts and other savings vehicles. The IRS previously announced updated maximum annual contributions to retirement accounts in 2023. For example, workers with a 401(k), 403(b), a 457 plan or the federal government's Thrift Savings Plan are now able to contribute up to $22,500 to their accounts.

That's a nearly 10% increase from what was allowed in 2022. Also, those over 50 have a higher catch-up contribution limit that would allow them to save up to $30,000 beginning this year. IRA contribution limits increased by more than 8% to $6,500 in 2023.

Anna Helhoski: There are also some changes coming to health savings accounts, or HSAs. If you're enrolled in a high-deductible health plan, the amount you can save for your health savings account is getting a boost. It's increasing by $200 for individuals and $450 for families.

Sean Pyles: People at or close to retirement age already had a few things going for them. Social Security benefits are set to receive an 8.7% cost of living adjustment in 2023 — the largest since 1981. Premiums and deductibles for Medicare Part B are also going to be cheaper for the first time in a decade. Insulin and vaccines will be less expensive too.

Anna Helhoski: Sean, we just ran through a ton of information about changes to how people can save for retirement. If you have any questions about saving for retirement or anything else money-related, really, leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901-730-NERD. You can also email us at podcast@nerdwallet.com. Visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you're getting this podcast.

Sean Pyles: This episode was produced by Anna and myself with help from Liz Weston. Audio wizard Kaely Monahan mixed our audio, and Anna wrote our show notes. Here's our brief disclaimer. We are not financial or investment advisors. This Nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Anna Helhoski: And with that said, until next time, turn to the Nerds.

Originally published on nerdwallet.com, part of the BLOX Digital Content Exchange.

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