Current Thinking

Thoughts on the “Keeping Your Retirement Act” and the “Increasing Retirement Amount Act”

Introduced on June 7 by U.S. Senator John Kennedy (R-LA), the pair of bills are designed to encourage more Americans to save for their retirement, and maintain greater control over those savings.

The Keeping Your Retirement Act would raise the required minimum distributions (RMD) age from 72 to 75 for certain retirement accounts. According to a statement from Kennedy’s office, “Currently, individuals who are at least 72 years old must make such withdrawals from their retirement accounts. These premature withdrawals can unnecessarily shrink people’s hard-earned savings.”

Not only would the change address the higher average life expectancies we have seen (pre-pandemic), but RMDs increase the taxable income of senior citizens who are still working – with the possible effect of putting those seniors into higher income tax brackets and thus increasing their tax liability.

The Keeping Your Retirement Act would give seniors more time for their retirement savings to grow before mandating annual withdrawals that could deplete their savings and increase their tax liability.

In its present form, the bill would apply to distributions required to be made after December 31, 2021, with respect to individuals who attain age 72 after that date.

The Increasing Retirement Amount Act would allow individuals who do not have access to a workplace retirement plan to save more of their money for retirement by increasing their individual retirement account (IRA) contribution limit to $12,000 per year. The legislation would increase the IRA contribution limit to $15,000 per year for individuals who are at least 50 years old and who do not have a workplace retirement plan.

Currently, Americans under 50 cannot contribute more than $6,000 per year to their IRAs, whether or not their employers offer a retirement plan. Contributions to traditional IRAs are tax-deductible. According to Kennedy’s office, in 2017, 50 percent of IRA owners who contributed to their traditional IRAs made the maximum contribution. As of March 2020, 29 percent of American workers did not have access to a retirement plan through their employers.

The bills introduced by Senator Kennedy are the latest in an increasing number of retirement-related proposals from lawmakers.  Legislation designed to enhance retirement security for Americans continues to garner bipartisan support, which is ultimately a very good thing for retirement savers.

About the Author

Richard Rausser

Richard W. Rausser has more than 30 years of experience in the retirement benefits industry. He is Senior Vice President of Thought Leadership at Pentegra, a leading provider of retirement plan and fiduciary outsourcing to organizations nationwide. Rich is responsible for helping to shape and define Pentegra’s viewpoint on workplace retirement plans, plan design strategy, retirement success and employee savings trends. His work is used by employers, employees, advisors, policymakers and the media to produce successful outcomes for American workers.  In addition, Rich is responsible for Pentegra’s Defined Benefit line of business, which includes a team of Actuaries and other retirement plan professionals as well as Pentegra’s BOLI line of business.  He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College.