Securing More Time to Invest: 401(k) Age Increase

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Why does it seem like there’s never enough time to save? Even in retirement, it seems like we still must keep the pace to save money. It’s a universal feeling, that has us all burning out, when we’re supposed to be the most at peace. Well, as CNBC’s Sarah O’Brian reports, seniors may be getting more time to invest in their own futures.  

More Time to Invest

Required minimum distributions (RMDs) is the amount that is annually withdrawn from retirement accounts like 401(k)s and IRAs, when the account holder reaches 72. This presents a win-lose situation — people get to enjoy the money they’ve saved, but they can’t let it continue to grow as an investment.  

Secure 2.0, pending Senate confirmation, would raise the age requirement for RMDs from 72 to 75. This means that seniors would have more time to invest in their own retirement accounts, potentially earning exponentially higher returns.

Benefiting from the Situation

Secure 2.0 would give seniors more time to invest and transfer their investments over to non-taxable accounts, like a Roth IRA. This is incredibly valuable to retirees who don’t need their RMD and can survive off other retirement income. They can hold off claiming their investment, let it grow, and transfer it over to another account to minimize taxes.

However, this strategy can make it harder to leave your account as an inheritance. If the inheritors are in a different tax bracket, you pay a higher interest rate than what they would pay when then claim it. In this instance, it makes sense to keep a traditional 401(k).

The Council for Retirement Security has made it its mission to see that every senior receives their benefits. Regardless of your 401(k)s, you should always be able to rely on Social Security.

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