401K Bill passes

[bjl584]

I just saw this come across the ticker on CNBC.
I haven't read any details only that Congress passed a bill to make some changes/upgrades to 401K plans.

Does anyone know any specifics?

[disneysteve]

https://www.cnbc.com/2019/04/02/house-committee-passes-secure-act-for-401k-plans-amid-retirement-income-crisis.html

[disneysteve]

It looks like it doesn't really change anything for folks who already have a 401k. It's more to encourage wider adoption of the plans by employers and to include part time workers in the plans.

It increases the age for RMDs for IRAs to 72.

It expands 529s to be used for home schooling and student loans. Though I don't know why you would have student loans if you have a 529. Wouldn't you spend the 529 money first before taking out loans?

[creditcardfree]

It expands 529s to be used for home schooling and student loans. Though I don't know why you would have student loans if you have a 529. Wouldn't you spend the 529 money first before taking out loans?

Unless your 529 happens to be earning more than the interest on the loan, so you delay using it and later pay off the loan. I don't think that would be happening in the current economic environment though.

[disneysteve]

Unless your 529 happens to be earning more than the interest on the loan, so you delay using it and later pay off the loan. I don't think that would be happening in the current economic environment though.

Well that could be because the 529 could be in equities.

The other thing is if the student takes out loans and the parents agree to repay them from the 529 based on good grades.

[Thrif-t]

Oh poop! Really! Now you can use 529s for loans, I've been waiting for that! Drat, now that 2 of ours are practically done.

I'd like to keep my $$ in the 529 and taken the subsidized loans, they are interest free until 6 mos after graduation. I mean why not keep my money invested and use theirs? Then pay the loans off at the end.

Off to read the link, I actually have one more kid starting school this fall so maybe this might be a strategy for him??

edit: Ok still a bill, well how long until it becomes law? I think I read about this bill (at least to the 529s being used to pay loans 4 years ago).

[disneysteve]

Ok still a bill

Yes, still at the committee level. I don't know how long it would take to actually become law and then when it would actually take effect.

Good point about taking the subsidized loans. We didn't qualify so I didn't think of that.

[Smallsteps]

It looks like it doesn't really change anything for folks who already have a 401k. It's more to encourage wider adoption of the plans by employers and to include part time workers in the plans.

It increases the age for RMDs for IRAs to 72.

I did not realize so many places did not include the part time workers in the plans, Every employer I have had already does that and has for many years not just recently. So is this solving a problem that only occurs for some.

I think the worst idea here is trying to get more ( especially small) employers to create plans with "automatic enrollment". This is NOT the answer to dismal savings for retirement.
Many that are auto enrolled it is a dismal 2% and is eaten up in fees and seems like plans are adopting more and more fees and charges for rolling over if you leave that job.

ONCE again those in office miss the mark of the problem. If they want to change the retirement savings crisis the answer if personal responsibility and financial literacy NOT making more naïve people targets to bad players jumping into 401k management to reap tons of fees and charges.

Just like ANY habit we need to convince people to save and learn to avoid fees and scams for their OWN reasons
Most ads and even "advice " do not talk to the people whom have little or no savings. Instead they tell people they need some high $$$$ amount that seems impossible to reach so why bother.
Many say if you did not save aggressively since you were in your 20s you are miles behind …. so again why bother if it is too late


The advice is always the same that first max out 401k and then IRA or ROTH account like ALL Americans can just write a check in January for the full amount to fund that … yes some can but the majority can not but Financial talking heads focus and those who do not need the help and advice but... can pay for the 'advice'.

Obviously the sky is falling rhetoric has not SOLVED this issue.


I am looking for the link but recently read how the 401k model is simply NOT working for many especially those whom do not understand the rules and roll over options etc.
many times I have seen co-workers cash out and pay taxes and penalties ( most low income whom could least afford losing ANY money) because they did not plan for the change of where to roll over etc. .Many leave plans with past employers ( often an option if amount is over some defined $ amount). They then pay fees each year for management and basically leaking money out of the account.

[Thrif-t]

I've worked part time for 20 years and have had access to a 401k at both places I've worked. Now granted these are not small businesses.

People are apathetic when it comes to 401k and fees. I am proud when I get my yearly letter that says I've paid 0 in fees. Most people don't care about the smallish fee and don't understand how small fees add up to big losses over your investment life.

I've tried helping people understand but they just think I'm cheap and pay no attention to me.

I don't believe in govt doing everything for you but in this instance, I think they do need to make people save! Maybe you don't have an option to cash out? I don't know the answer but clearly a high percentage of Americans are not equipt to save on their own sadly.

[disneysteve]

I am proud when I get my yearly letter that says I've paid 0 in fees.

It isn't just outright fees but also high expenses. Let's say your 401k offers funds that have a 1% ER. Compare that to a fund at Vanguard or Fidelity with an ER of 0.2%. That means you're paying 5 times as much to have that fund even if there are no "fees".

I don't believe in govt doing everything for you but in this instance, I think they do need to make people save! Maybe you don't have an option to cash out? I don't know the answer but clearly a high percentage of Americans are not equipt to save on their own sadly.

I don't think savings should be forced. I'm okay with automatic enrollment because there's always a way to opt out.

And as I said in the other thread about retirement savigns, I'm not sure the "high percentage of Americans" is really that high. About 1/3 of Americans live in poverty or near poverty levels. That correlates very closely with the 29% that article said have no retirement savings which makes sense. If you're struggling every day to put food on the table and keep a roof over your head, you don't need 3% of your meager income going to some account that you won't be able to access for 30 years. You're starving today.