Your grandma probably taught you to save, but your government is going to make you do it. A key provision in the Secure Act 2.0 under consideration in Congress would mandate retirement savings for Americans. "This bill would automatically enroll employees into their 401(k), and make a mandatory 3% contribution," says Troy Sharpe, Certified Financial Planner with Oak Harvest Financial Group. "You can opt out of this if you're an employee, but if not, you will be automatically enrolled, and 3% of your salary will go into your 401(k), and that will increase 1% per year automatically."
Some companies have required employees to enroll in retirement programs before, but this is the first time there would be a law requiring it. While it seems like an extreme step, Sharpe says it may actually save taxpayer dollars down the road, especially with American retirement savings down due to the pandemic. "Without increased participation in retirement accounts and employees saving more in their 401(k), they become more dependent on the government later in life," he tells KTRH. "And the government already has hundreds of trillions of dollars in unfunded liabilities."
"Having a mandatory retirement contribution definitely goes against the grain of what we believe in in this country," continues Sharpe. "But the government is in a tough spot here, because people aren't doing enough on their own."
As for the legislation's chances of passage...
"I'd say about a 99% chance this will go through," says Sharpe. "It has broad, bipartisan support, and few things in Congress these days have that kind of support."
Listen to Troy Sharpe on the Retirement Income Show, Sundays at noon on Newsradio 740 KTRH