Retirement: Secure Act 2.0 ‘to help close the access gap,’ expert says
Georgetown University Center for Retirement Initiatives’ Angela Antonelli joins Yahoo Finance Live’s Julie Hyman to discuss navigating retirement, the impact on retirement savings following changes in the Secure Act 2.0, the lack of access to retirement savings, strengthening our retirement system, and the outlook for retirees.
JULIE HYMAN: Almost 60% of US households had no retirement accounts in 2020. That's according to a 2021 income survey by the US Census Bureau. Congress is now looking to change that with some new retirement planning legislation that's in the SECURE Act 2.0 bill tucked away in its end of year spending package.
Here to break down the impact for your retirement savings is Angela Antonelli, executive director of the Georgetown University Center for Retirement Initiatives. Thank you for being here, Angela. This is really important stuff because, indeed, a lot of people, if they have retirement accounts, it's through their workplaces. But there are lots of workplaces that don't offer that. So how far does this bill go towards bridging that gap?
ANGELA ANTONELLI: The gap is a huge gap. I mean, more than half of all private sector workers today don't have access to an employer sponsored plan. States have been-- state leaders have recognized this and have been adopting state facilitated retirement savings plans to try and bridge that gap. But what Congress has now done is recognized just how important and how significant this gap is in lack of access to retirement savings. And it's reflected in the provisions of SECURE 2.0, which has hundreds of-- has almost 100 different provisions in it.
But some of those related to closing the access gap are really focused on providing plan options that can make it easier for more small businesses to consider adopting plans and therefore covering their workers. It provides greater financial incentives to help cover those costs for small businesses. It also helps to bring more workers into the system by expanding and allowing more part-time workers to be covered more quickly by their retirement plans.
And even more significantly, what we've seen and what we've been learning is the power of auto enrollment. And when workers are automatically enrolled in retirement plans, they tend to participate at very high rates. So there's a lot of great stuff in there to help close the access gap and ultimately get workers in there and begin to save and boost savings overall.
JARED BLIKRE: Angela, one of the key provisions that I'm looking at that really sparked my interest was the what amounts to matching contributions by the federal government for stock purchases up to $1,000 per person. I've got to imagine. I mean, this seems to be a first step, but over time, we know the way federal legislation goes is that amount can increase. That would seem to me to be a huge potential tailwind not only for stocks, but also for savings for individuals. Just wondering how much focus and anything else you can add surrounding the details on that for us.
ANGELA ANTONELLI: Well, I mean, I can speak to it in the context of retirement. I think what we start to see in congressional action around trying to improve and strengthen our retirement system-- and by strengthening our retirement system, what they're doing is helping to improve individuals' overall financial well-being. And one of the things that we have to recognize is there's a tremendous amount of inequity in our retirement system today. As I mentioned, the access gap is huge. And that gap predominantly falls on lower income workers. It falls on often-- there's inequities by gender and by race that are significant to address.
And one of the things to help boost retirement savings is not only getting people into the system, but for low and moderate income workers, there are things like tax credits, for example, the savers tax credit that's been available that's little known, little used. And what the federal government is doing here in the context of SECURE 2.0 reform is creating the option of making-- encouraging contributions, but in encouraging contributions, also supporting boosting the amount that's ultimately saved by making that saver's tax credit better now and also refundable for more low and moderate income workers.
So, again, this is something that is a significant development in encouraging savings and helping to boost overall amount of savings, but again, by closing that access gap by doing these-- creating these other incentives, hopefully it will go a long way to closing the gap, but also the tremendous inequity we see within our retirement system by gender and by race.
JULIE HYMAN: Angela, what's the big hole here? In other words, while this does make progress, what's the one thing it doesn't do that you wish it did to better close the gap and to address inequity?
ANGELA ANTONELLI: Well, I think one of the things that we often just forget is the simple notion that employers in the United States don't have to offer a retirement plan. And so that's part of the reason, and it's particularly difficult. Our system today is particularly burdensome for small businesses in terms of the administrative burden and costs that we've put on them to create these types of plans.
And so SECURE 2.0 continues the incremental steps towards offering more options to these small businesses that are intended to be simpler and lower cost for them that the industry can be out there, advisors and others, working with small businesses to try to cover more workers. And quite honestly, today, given today's job market, it's, I think, employers increasingly find it important that they do offer these kinds of benefits to their workers and able to attract and retain workers today.
But the reality is, we'll have to see over time. Many of these provisions will not take effect before 2024. So we have some time to see what kind of impact they ultimately will have on helping to close the access gap. And will it, in fact, help to have more employers and more workers be in our retirement system and saving for retirement.
JARED BLIKRE: Angela, we've got time for one more here. I'll give you the floor. Anything we didn't go over here, anything that a retiree should be looking forward to or maybe not forward to in the new year.
ANGELA ANTONELLI: So, again, a lot of these provisions will take time to go into effect. But again, closing the access gap is going to be significant, getting more people covered in our system today, more small businesses able to offer plans. The ability to boost the level of savings for folks again, an example of that relates to debt is often an obstacle to being able to save. Older workers surprisingly have a tremendous amount of student loan debt. And one of the things that-- one of the provisions of SECURE 2.0 allows an employer to be able to make a matching contribution, even though a worker might be paying off student loan debt.
But I think even on top of that, in addition to retirement savings, is a really positive focus on overall understanding financial stress on workers today, how that affects productivity and addressing issues around overall financial well-being.
And so things like allowing workers greater flexibility in the case of an emergency to take out withdrawals from their retirement funds if they need to penalty-free because the penalties can be significant, to give that flexibility to make those withdrawals, to also now encourage the creation and adoption of emergency savings accounts that sit alongside retirement accounts is also a really positive development that recognizes the challenges that that's just part of everyday life and that families face all of the time and may need to address.
And then also in the longer term is that flexibility with people who have retirement savings and understanding that it isn't one size fits all, and that individuals need to have some flexibility to decide when they need to and how much they need to take out, out of their retirement accounts, and be able to have greater flexibility to be able to manage that. And that's reflected in things like giving greater flexibility with retired-- with the required minimum distributions and what needs to be taken out of the accounts and at what age.
So there's a lot of great stuff in there. And hopefully it will continue to move the ball forward in strengthening our retirement system and overall financial well-being for millions of American workers, and also making it easier for employers to offer this as a benefit to their workers.
JARED BLIKRE: Well, lots of changes coming down the pike here, as you mentioned, but also coming down somewhat slowly-- a lot of these changes not expected to take place until 2024. Thank you for that, Angela Antonelli.