How Your IRA and 401(k) Are Affected by New Rule Changes
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Here's your money briefing for Wednesday, February 1st. I'm J.R. Whelan for The Wall Street Journal. We're already a full month into the new year. And as you continue to map out your personal finances for 2023, it's a good time to take a look at changes Congress recently made to your IRA or 401k plan and new rules encouraging people to sign up.
Social security only gets you so far, and what experts are seeing is that people aren't saving enough, and then they're living longer and really running out of money in retirement.
Wall Street Journal personal finance reporter Ashley Ebling has been keeping tabs on all the changes, including those that would allow employees at small businesses to save for the future. We'll go through the list with her after the break.
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Are you putting money away in a 401k or a retirement account? Millions of Americans aren't, and it could cost them dearly when their working years are over. Congress has passed a slate of rule changes to make it easier for people to sign up and to make sure they're accessing their funds in their later years. WSJ personal finance reporter Ashleya Ebling has been following this story, and she joins me now. Hey, Ashleya, thanks for being with us.
Thanks for having me on.
So, Ashleya, Congress made a raft of changes to retirement account rules at the end of last year, and that was just the latest in a series of changes that were pushed through.
In earlier legislation, Congress worked on putting in provisions to do auto-enrollment and auto-escalation. That basically really helped people with big employers. They would automatically be put in their retirement savings plan.
How do recent congressional changes aim to boost retirement savings participation?
And then every year, the amount they contributed would go up a certain percentage. People could always opt out. But for a lot of people, that really helped get more people on track to savings. This time around, Congress is focusing on incentives for small businesses. It's just crucial that people understand that saving for retirement is something they have to do now. Social security only gets you so far. And what experts are seeing is that people aren't saving enough and then they're living longer and really running out of money in retirement.
Yeah, seems like Congress is pulling out all the stops to encourage people to save. But, you know, in a lot of cases, employees at small businesses are sort of left on the sidelines because the small businesses can't afford to provide a retirement plan for their employees. How do the new rules address that?
So it's true if you work for a small employer, you're less likely to have the opportunity to save in a 401k or workplace plan. But this new law puts in incentives for small employers with up to 50 employees. The company that is eligible for an enhanced tax credit to start up a plan as of this year, as of January 1st. And the new credit covers 100% of initial costs of the plan up to $5,000 for three years, depending on the number of eligible employees.
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