In late May, the House of Representatives passed the Secure Act with an overwhelming bipartisan majority of 417-3. The bill, which currently awaits passage in the Senate, represents the most significant change in retirement policy since the Pension Protection Act in 2006.
When you study the details, it’s little wonder the Secure Act received support from both parties in Congress, as well as the retirement product industry. Contained within are sweeping changes designed to encourage Americans to save for retirement by improving access to more types of financial products. The bill would also create incentives for employers to expand access to 401(k) plans, particularly to employees of small businesses and part-time employees — two groups traditionally left out of the employer-sponsored retirement planning landscape.
Should the bill pass the Senate and president’s desk to become law, financial professionals may need to update their strategies to incorporate more types of retirement products. To help you prepare for questions you may receive from clients, here are three provisions worth pointing out.
First, the bill would allow employers to offer annuities, including fixed index annuities (FIAs), paving the way for greater access to lifetime income. According to a survey by the Employee Benefit Research Institute, 80% of 401(k) plan participants are interested in putting some or all of their balances in a guaranteed lifetime income option like an annuity. With Americans living longer and healthier lives, traditional retirement options like 401(k) plans and pensions are not guaranteed to last. In fact, outliving savings is the number one fear of pre-retirees when it comes to their financial health during retirement.