The Secure 2.0 Act of 2022, a bipartisan retirement savings law, was signed into law by President Biden on December 23, 2022. As part of Secure 2.0, workplace savings plans will be expanded, retirement account contributions will be rewarded, and retirement tax incentives will be reshaped.
As a result, retirement savings accounts will undergo numerous changes for years to come as a result of the retirement savings law. For example, tax breaks are available for 401(k), 403(b), Roth, IRA, and CAL accounts, among others. Obviously, these changes could have a significant impact on your retirement savings and personal finances.
Those who support the legislation believe that the changes in the Secure 2.0 Act will boost retirement savings. Secure 2.0, however, has raised concerns that some of its provisions primarily benefit the wealthy.
While Secure 2.0 isn’t scheduled to take effect until 2024 or beyond, retirement finance isn’t standing still in 2023. Regardless, the future impact of changes in tax rules, savings plans, Social Security benefits, and more will be felt in the near future by older Americans.
What’s in store for you? But first, let’s take a closer look.
Flexibility in retirement timelines.
Those who participate in tax-deferred retirement accounts, including 401(k)s and traditional IRAs, must begin receiving required minimum distributions (RMDs) when they’re 72 years old. The reason? It is to recoup the government’s share of gains made in the account while it was tax-free.
Initially, the Secure Act raised the retirement age from 70 ½ to 72. However, as part of Secure 2.0, the age limit will be raised again to 73 on January 1, 2023, and 75 on January 1, 2033.
Furthermore, Secure 2.0 would reduce from 50 percent to 25 percent penalty for not taking RMDs, or 10 percent if the mistake is corrected promptly.
“Many Americans have saved heavily and, in some cases, exclusively in their pretax retirement accounts,” Sam Eppy, CPFA®, a managing partner at Levanti Wealth in Ft. Lauderdale, Florida, told MassMutual. “Many of those account holders are doing what they can to strategically save those funds for when they need them most. So allowing Americans more time to spread out their distributions is useful for their retirement income planning.”
Moreover, the new law raises the limit on how much retirement savers can put into qualified longevity annuities. You can purchase these types of annuities using qualified retirement accounts, eliminating some of your RMD requirements. You can use the funds as a guaranteed income later in life.
A QLAC can be funded with a maximum of $135,000 qualified retirement funds or 25 percent of the aggregate account balance. The maximum amount allowed in a QLAC has been increased to $200,000 in Secure 2.0, eliminating the 25 percent cap.
Enrollment will be required automatically.
With some exceptions for small businesses, workers will be automatically enrolled into newly created 401(k), and 403(b) plans in 2025. A person’s automatic enrollment will begin between 3 and 10 percent of their pay scale. Additionally, the savings rate will be increased by 1 percent each year until it reaches 10 to 15 percent.
As a result of these requirements, retirement plan participation rates are expected to rise, particularly among minorities.
An increase in retirement plan contributions.
2023 will be the first year in which retirement savings vehicles (IRAs, 401(k)s, etc.) get inflation-adjusted contribution limits.
A person over 50 can now put $7,500 into an IRA this year instead of $7,000 if they are 50 or older. For people under 50, the limit has been raised to $6,500 from $6,000 last year, including the $1,000 catch-up contribution for older savers.
There is a maximum contribution of $30,000 you can make to a workplace retirement plan such as a 401(k), 403(b), or (for federal employees) a Thrift Savings Plan this year. Compared to 2022, that’s an increase of $3,000 per year. Also, younger adults have a new contribution limit of $22,500 instead of $20,500.
The catch-up contribution limit has been raised.
Also, in the coming years, Secure 2.0 will include multiple provisions to increase contribution limits. For example, there are currently certain limits on what can be contributed to a retirement plan by someone age 50 or older. Starting in 2025, Secure 2.0 raises these limits to the greater of $10,000 or 50 percent more than the regular catch-up amount for those who are 60, 61, 62, or 63. In addition, these amounts will be indexed for inflation after 2025.
Additionally, Secure 2.0 Act rules will change how eligible workers over $145,000 make catch-up contributions in 2024. Inflation will also be adjusted for the income threshold.
Specifically, IRA catch-up contributions will be indexed to inflation starting in 2024, raising the $1,000 cap for the first time in over a decade. In addition, a new, higher contribution cap will apply to people between 60 and 63 beginning in 2025, which will also link 401(k) catch-up limits to inflation.
A savings credit to a savings match.
Starting in 2027, the Secure 2.0 Act will replace the nonrefundable Saver’s Credit with a federal matching contribution deposited directly into your IRA or retirement plans.
As part of the saver’s match, people can contribute up to $2,000 to their IRA or retirement plan. It will, however, be subject to income limits and phase-outs.
Inflation-adjusted Social Security payments.
Social Security beneficiaries are receiving their most significant increase in monthly benefits for more than 40 years because of inflation. COLA increases the average monthly retirement benefit by $146, from $1,681 to $1,827, due to an 8.7 percent increase in the cost of living.
January 2023 is when the first retirement, disability, and survivor benefits go out. However, SSI recipients got their first COLA-boosted payment on December 30. The SSI program is Social Security’s benefits program for those who are aged 65 or older, blind, or disabled.
In the third quarter of 2022, the COLA will be based on price changes for a set of consumer goods and services. However, as inflation has cooled somewhat, it has plummeted to 7.1 percent in November from a 40-year high of 9.1 percent in June. Moreover, due to the fixed benefit increase through 2023, the new COLA will provide a solid buffer against higher prices if that trend continues.
Changes to Medicare.
There will now be reductions in Medicare Part B premiums and deductibles. In other words, millions of retirees will be able to afford Medicare for the first time in over a decade. For 2023, Medicare Part B will cost $164.90 per month, a decrease of 3%, or $5.20 per month, from $170.10 per month in 2022.
A $226 annual deductible will be in effect in 2023 for Medicare Part B beneficiaries, a reduction from the $233 deductible in 2022.
The Inflation Reduction Act guarantees that copays for insulin for 3.3 million Medicare Part D beneficiaries with diabetes will be capped at $35 for a month’s supply beginning in 2024.
What else is noteworthy in 2023?
There will be no copays or deductibles associated with vaccines covered under Part D. As a result, vaccinations such as shingles will be less expensive.
Please note that several years will pass before most of the provisions of the Inflation Reduction Act, including lower prescription drug prices and out-of-pocket expenses for 59 million Medicare beneficiaries, take effect.
A 401(k) can be used for emergency savings.
Additionally, the 2023 bill seeks to make it easier for individuals to access their 401(k) savings in an emergency.
For individuals under 59 ½, tapping into their retirement accounts as an emergency fund comes with a 10 percent penalty. Moreover, money withdrawn from accounts is also taxed as income, which makes it essentially double-penalized.
In the wake of the COVID-19 pandemic, employers became concerned because early 401(k) withdrawals were widespread despite heavy penalties. As a result, 401(k) plans now include emergency savings accounts, allowing employers to enroll employees automatically.
Also, rainy-day funds of up to $2,500 will be available for employees to save. In addition, employees who use their emergency fund will not be penalized 10 percent if they have to use it.
Additionally, the bill allows penalty-free withdrawals for exceptional circumstances, such as payment of long-term care insurance and withdrawals for terminally ill or domestic abuse victims. Moreover, federal disaster victims can withdraw up to $22,000 without penalty, plus three years to repay the money and income taxes they owe.
From 2027 onwards, the government will contribute $1,000 each year to eligible retirement accounts. This program encourages low- to moderate-income workers to save for retirement. Currently, workers with an income tax liability are eligible for this credit. However, they are also eligible if they have no income tax obligation.
The HSA has just improved, making it an even more valuable retirement tool.
Individuals and families can contribute $200 more to their health savings accounts (HSAs) starting this year.
Those with self-only coverage under a high-deductible health plan can contribute $3,850 per year to an HSA, up from $3,650 in 2022. In addition, from $7,300 to $7,750, the HSA contribution limit for family coverage has also increased.
Between 2021 and 2022, contribution limits increased by just 1.4% or roughly 5.5%.
There is an option for people who enroll in a high-deductible health care plan (HDHP). If you have a qualified HDHP, you can also open an account as a self-employed freelancer or business owner. These accounts are subject to annual IRS parameters.
A high-deductible plan costs less per month than other types of plans. However, the deductible is higher, which is the amount to pay before the insurance begins to pay for your expenses. When you turn 65, you can use the money you don’t use for non-qualified expenses.
Deductions for standard expenses.
In most cases, taxpayers take the standard deduction instead of itemizing their deductions. Those married couples who fall within that majority can take $25,900 off their taxable income in 2022, up from $25,100 in 2021. A $12,550 standard deduction will be replaced by a $12,950 standard deduction for individuals.
In the 2021 tax year, the standard deduction was $1,700 for a single filer and $2,700 for a couple filing jointly; in 2022, it increased to $1,750 and $2,800, respectively.
The full retirement age.
In 1983, Congress raised the Social Security full retirement age (FRA) from 65 to 67, but gradually. By mid-2023, the change will be complete, with FRA reaching 66 years and six months.
Over the past few years, the Full Retirement Age (FRA) has increased by two months at a time, allowing you to receive 100 percent of your retirement benefit.
FRA is 66 years and four months for people born in 1956. By the end of April this year, you will reach the milestone if you were born between September and December 1956. Those born in 1957 can claim their full retirement benefit midway through the year at 66 and 6 months. If you were born after 1960, you would reach FRA at 67.
Depending on your age, you can start collecting retirement benefits before FRA , the minimum age of 62. But you will lose up to 30 percent of your monthly paid benefits. Also, if you wait past FRA, you can enjoy an increase of 8 percent per year until you turn 70.
1. What is the Secure Act 2.0?
As part of the SECURE Act 2.0, the Securing a Strong Retirement Act of 2022 expands on the SECURE Act passed in 2019. With this proposed legislation, people can access more retirement funds and save more toward their retirement as they prepare for retirement.
2. Regarding retirement or retirement planning, what are the most important things to remember?
- A change in the age at which required minimum distributions are required. For example, it would gradually raise the retirement account withdrawal age from 72 to 75 for 401(k)s, 403(b)s, IRAs, etc.
- A catch-up provision that is enhanced. Under current law, participants aged 50 and older are entitled to a catch-up contribution of $6,500. For workers 62-64, this would be increased to $10,000. Moreover, all catch-up contributions must be made as Roth contributions (after-tax). For individuals 50 and older, the catch-up amount for individual retirement accounts (IRAs) is currently $1,000, but starting in 2023, the SECURE Act 2.0 indexes this limit for inflation.
- Elective deferrals apply to student loans. The repayment of student loans may prevent workers from contributing to retirement plans. This can result in them missing out on valuable matching contributions from their employers.
- There is a tax credit for savers. Under the change, all employees under the income cap would receive 50% tax credits up to $1,500 a year, removing the phase-out limits.
- Long-forgotten pension benefits can be retrieved online. For example, employees who change jobs often lose track of their retirement plans. People can find their lost money by using this provision, which would establish a national “lost-and-found” program.
3. What are the most relevant things employers need to know?
- Automatic enrollment. Automatic enrollment would be required for employees eligible for 401(k)s and 403(b). Contributions would be capped at 10% and start at 3%. Every year, the contribution percentage increases by 1%. Different contribution percentages or opting out of the retirement plan are available to employees.
- Tax credits for small businesses are being increased. Companies with fewer than 100 employees can receive a 100% tax credit of up to $5,000/year for the first three years for setting up a retirement plan.
- A safe harbor protects employee deferral failures. For example, employers may face penalties when automatic enrollment and increases are not correctly administered. Nevertheless, penalties may be waived if administrative errors are corrected within 9 ½ months after the end of the plan year. This would be effective as of the date of enactment.
- Roth contributions. SIMPLE IRA plans will now accept Roth contributions. The previous law did not allow Roth contributions (after-tax) to 401(k) and 403(b) plans. SEP IRAs would enable employees to have some or all of their contributions treated as after-tax (Roth) contributions.
- Part-time employees. Part-time workers are more prevalent than ever before in the workforce. Employees with two consecutive years of service and 500 hours of service can join an employer’s retirement plan under the new legislation.
4. How might this affect worker participation and prevalence in defined employer contribution plans (401(k) and 403(b)?
It will help employers support their employees’ retirement plans more efficiently and cost-effectively.
Employers are incentivized to help workers plan for a secure retirement.
5. How does Secure 2.0 affect Social Security?
Not much at all.
One downside of the Act? It doesn’t solve the Social Security Trust Fund crisis, which runs out within ten years.
6. What is the effective date of the SECURE 2.0 Act?
According to the specific provision, that depends. Some take effect immediately, and others begin in 2024 or later. For example, automatic retirement plan enrollment starts in 2025, while the RMD age increases to 73 in 2023.
The post 2023 is Going to be a Year of Big Retirement Changes appeared first on Due.
5 Ways to Become a Better Public Speaker This Year
Opinions expressed by Entrepreneur contributors are their own.
The ability to speak publicly is a skill that everyone can use. From coaches to entrepreneurs and writers, anyone who wants to get out into the world to market what they do needs to be an effective speaker.
This article will discuss five ways to become a better public speaker — five methods for sharpening your raw talents to morph into a more effective communicator overall.
Related: This Is the One Thing You Need If You Want to Get Paid Speaking Gigs
1. Practice in different environments
This tip comes from an exercise that musicians sometimes use while practicing.
The idea is to see if you can replicate your performance no matter where you are. As a speaker, you will encounter all kinds of scenarios and audiences. You have surely had distractions around you, being in front of people with different interests, being under different lighting and noise conditions and more.
Practicing speaking in different environments will force you to get comfortable performing under all circumstances. Without the crutch of your favorite environment, you have to remember your lines and recall cues completely on your own.
Related: 4 Expert-Backed Strategies for Improving Your Communication Skills
2. Produce different kinds of ‘speaking’ content
Another tip for becoming a more well-rounded speaker is to produce a variety of speaking content. Speakers don’t always have to stand on a stage and talk to live audiences.
I create speaking content across many channels — from my website and blog to YouTube and my podcast series. I distribute audio and video recordings of my speeches to my clients and promote them on my social channels. I go live on Facebook and other platforms to speak directly to my audiences that way. You can do the same.
This variety isn’t by accident. Producing these different types of content in the digital space allows individuals to sharpen their speaking skills and reach larger audiences than they could in person.
3. Get active on audio platforms
Here’s a speaking tip that doesn’t involve performing as much as learning from what others are already doing: Get active on professional audio platforms such as Clubhouse and Twitter Spaces to meet with like-minded individuals and discuss relevant topics.
Doing this lets you compare notes with industry counterparts while working on your speaking skills. You will endeavor to communicate with other business leaders and coaches from around the world and all different walks of life.
Related: The Role of Effective Communication in Entrepreneurial Success
4. Take every opportunity to speak
Speak to a group at every available opportunity. I used to wonder how I could speak to an audience when the professional invitations dried up for a bit, and the answer was local service groups.
Toastmasters International, Rotary International, Lions Clubs International and the Freemasons are all great examples of the types of organizations that not only perform good works for their local communities but also welcome speakers and presenters to deliver valuable information to their members.
I find chapters of these groups in many cities and towns that I visit. Having these groups near me allows me to cut down on my travel time and simply makes it more convenient to continue practicing speaking skills while also putting my abilities to good use for my community.
Not only will this help you with your skills at public speaking, but it’s a rewarding experience as well.
5. Work with a speaking coach
Finally, every speaker-in-training could benefit from working with a speaking coach or mentor. These professionals provide their clients with professional tips and feedback on everything from the words they’re using to how they’re delivering them to audiences.
Some speakers wonder why they can’t just rely on their friends and families to provide them with honest feedback, and there are some good reasons for not doing that. Family and friends are kind, but that’s exactly the problem. Speakers need the unrelenting honesty of professional coaches if they truly want to leave their bad habits behind and become stronger.
I hired a professional speaking coach to improve my skills, and I can attest that it pays dividends every single day in my career.
Related: Leading Speaking Coach Shares His Strategies To Get A Flood Of Clients From Webinars And Virtual Presentations
Communication is everything to professionals
Whether it’s in the world of business, non-profits or coaching, speaking effectively is vital to success. Communication means everything to professionals, and those who can’t tell others what they do and what they’re about can’t expect to get their visions too far off the ground.
I followed these five actionable tips for becoming a better speaker, and I came out on the other side as a communicator that I never even thought possible. You will do the same.
26% of U.S. Workers Would Rather Undergo a Root Canal Than Follow This Workplace Policy
Opinions expressed by Entrepreneur contributors are their own.
According to a recent survey conducted by job site Monster, more than one in four (26%) U.S. workers would rather undergo a root canal procedure than work in their offices five days a week. Additionally, nearly two in five (38%) workers said they would quit a job that required just one day onsite. These staggering statistics reveal a clear shift in workers’ attitudes towards the traditional office environment, and companies that fail to adapt to this change risk losing their most valuable asset: their employees.
As a highly experienced expert in the field of hybrid work, I talk with 5 to 10 leaders every week about how to make hybrid work serve their needs well. I ask them what their top concern is, and most say it’s hiring and retaining talented staff.
External surveys say the same thing, such as this recent survey by Vistage of the leaders of small and medium-sized businesses. It found that 60% of SME CEOs are planning to increase headcount in the year ahead, with only 7% planning on reducing headcount. According to Vistage Chief Research Officer Joe Galvin, this is a significant shift from the trend of big companies making headlines with layoffs, as small and medium business CEOs are reluctant to lay off their hard-won new employees. One key reason for this shift is the recognition that hiring challenges are impacting the ability of these businesses to operate at full capacity. With 61% of CEOs saying that hiring challenges are a major concern for their ability to operate effectively at full capacity.
Given this information, I confidently tell the leaders whom I advise that the future of work is in a flexible hybrid work model that allows for some full-time remote work. This model not only keeps workers happy and engaged, but it also has a positive impact on a company’s bottom line.
Related: You Should Let Your Team Decide Their Approach to Hybrid Work. A Behavioral Economist Explains Why and How You Should Do It.
Increased productivity and employee engagement
One of the most significant benefits of a flexible hybrid work model is increased productivity and employee engagement. Studies have shown that remote workers tend to work more efficiently and are less likely to experience burnout. A mid-size IT services company that I consulted for implemented a flexible working policy, and they saw a 20% increase in productivity among their remote workers.
Remote workers have the ability to create their own personalized work environment, which leads to an increase in productivity. They can work from a location that is most comfortable for them, whether that be their home, a coffee shop or a coworking space. This leads to a decrease in distractions and an increase in focus, resulting in a higher level of productivity.
Flexible working also has a positive impact on employee engagement. When employees have the ability to work in a way that suits them best, they are more likely to be engaged and motivated. This leads to a decrease in turnover, and an increase in employee loyalty and job satisfaction.
Access to a wider talent pool
A flexible hybrid work model also allows companies to tap into a wider talent pool. When companies are not limited by geographical location, they can attract and retain the best talent from all over the world. A large financial services company that I worked with had difficulty finding qualified candidates in their local area, but by implementing a flexible working policy, they were able to hire top talent from other parts of the country.
A flexible working policy also allows for a more diverse workforce, as it can attract candidates who may have previously been excluded due to geographical constraints. This diversity leads to new perspectives, ideas and innovation.
Cost savings on talent
Flexible working can also lead to significant cost savings for companies. A flexible hybrid work model reduces the need for office space, and it can also lead to a reduction in absenteeism and turnover. A retail company that I consulted for implemented a flexible working policy, and they saw a 30% reduction in absenteeism due to less workers taking sick days and a 20% reduction in turnover.
When employees have the ability to work from home, it leads to a reduction in absenteeism as they are less likely to be affected by things such as traffic, weather, or public transportation issues. This can also lead to a decrease in sick leave, and an increase in overall productivity.
Flexible working can also lead to a reduction in turnover, as employees are more likely to be satisfied and engaged in their work. This leads to a decrease in the cost of recruiting and training new employees.
Addressing cognitive biases
Cognitive biases can play a significant role in decision-making when it comes to flexible working. The status quo bias, for example, leads managers to resist change and stick to the traditional office environment. The sunk cost fallacy can also come into play, where managers may be reluctant to change the way things have always been done because they have invested so much time and resources into the current system. By being aware of these cognitive biases and actively working to overcome them, companies can make more informed and effective decisions about their working policies.
One way to overcome these biases is to gather data and conduct studies on the impact of flexible working on employee productivity, engagement, and turnover. This can provide concrete evidence to support the implementation of a flexible hybrid work model. Additionally, it is important for managers to actively seek out feedback from employees on their preferences for working arrangements and to consider their needs and concerns.
Implementing a flexible hybrid work model
Implementing a flexible hybrid work model can seem daunting, but with proper planning and communication, it can be done successfully. It is important to set clear guidelines and expectations for remote work, such as setting specific hours of availability and ensuring regular communication with team members.
It is also important to provide the necessary tools and resources for remote work, such as a reliable internet connection and a secure virtual communication platform. Providing training on hybrid work best practices and technology can also help to ensure a smooth transition, as can hiring a hybrid work consultant to guide your transition.
Related: Salesforce CEO Marc Benioff Is Right. New Employees Are Less Productive in a Hybrid Work Setting — But Why?
The shift in workers’ attitudes toward the traditional office environment is undeniable. Companies that fail to adapt to this change risk losing their most valuable asset: their employees. A flexible hybrid work model that allows for some full-time remote work is the future for anyone who cares about worker retention, increased productivity, access to a wider talent pool, cost savings, and overcoming cognitive biases. The time for companies to implement this model is now. As a leader of a company, it’s important to recognize that the traditional office model may no longer be the best option for your employees or your business. By embracing a flexible hybrid work model, you can retain top talent, increase productivity and save costs. The future of work is here, and companies that adapt will be well-positioned for success.
Google Worker Laid Off While On Leave Caring For Sick Mom
One person who was laid off from Google in the company’s wave of staff cuts last week says he was on a leave from work taking care of his mother who is terminally ill with cancer.
Paul Baker was on leave for about a month when he received an email letting him know the company was laying him off, along with around 12,000 others, he told Insider.
“While on carer’s leave for my immediate family member’s terminal cancer, I too was laid off. After the initial shock, it morphed into sadness because I miss the people,” he also wrote on LinkedIn.
Related: More Than 1,600 Tech Workers Are Being Laid Off A Day On Average In 2023, According to a New Report
On Jan. 20, Google’s CEO Sundar Pichai sent a note to employees taking responsibility for hiring “for a different economic reality than the one we face today.”
Baker told Insider that he was on leave and was told by a friend about the layoffs, then found his work laptop had been “cut off,” the outlet wrote.
He was a video producer at Google, according to his LinkedIn, and had been at the company since 2018. Baker told Insider he was feeling “shock and sadness.” The outlet said it verified the leave period as well as his severance email and prior employment with Google.
Related: In a Viral TikTok, An Ex-YouTube Employee Talks About Getting Laid Off During a Business Trip
“I’ll truly miss it,” he said.
Baker also told the outlet he has not received information about how his severance package would be affected by the fact that he was on career leave to care for his mom.
Pichai said in the memo the company will provide “six months of healthcare, job placement services and immigration support for those affected.”
Still, he told Insider he would love to go back to the company.
“If there’s ever a Google position open for another video producer position, I would take it in a heartbeat,” he said.
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