Secure Act 3.0
February 7, 2024
If you read my two recent blog posts on SECURE 2.0 and/or listened to our podcasts on the topic (see below) you know I think the new legislation stands for "Setting Every Community Up for Retirement Exasperation."
Saving for retirement is already needlessly complex. SECURE Act 2.0 fixes very few problems affecting most Americans. A strong argument could be made that it makes saving for retirement even more confusing. This motivated me (and Scott) to come up with what we think is a better way to save for retirement, healthcare, childcare and college savings. Scott's plan differs slightly from mine. You can listen to his plan, and my first pass at this in SECURE Act 3.0 pod below. What follows is my slightly updated version since recording that pod.
- ERA (Employee Retirement Account) — Replaces all other defined contribution 401(k)/403(b)/457(b) etc-like retirement plans. Open to any employer of any size. All Americans will have the exact same work place plan with the exact same rules.
- IRA (Individual Retirement Account) — Identical to current Roth IRA
- FSA (Flexible Savings Account) — Healthcare and childcare expenses
- CSA (College Savings Account) — Saving for college
Some key points
- All money in all plans contributed on a Roth basis
- If available today, I propose a $20,000 a year limit for the ERA, and a $10,000 a year limit for each of the other plans. Increases in annual contributions would be indexed to inflation.
- Contributions to the ERA and IRA can be accessed at any time. This gives total flexibility when emergencies arise.
- No catch-ups
- No more RMDs (Required Minimum Distributions)
Tip of the Cap to the Bush Administration
If my ideas sound familiar, they should. On January 31, 2003, the Bush Administration announced proposed major changes to retirement plans with the creation of the LSA, the RSA, and ERSA that would have drastically simplied saving for retirement. Unfortunately that plan never got the public debate it deserved.
Stay wise and well (and let's work to simplify saving for retirement)
Related Podcast:
SECURE Act 2.0 (pt. 1) Setting Every Community Up for Retirement Enhancement or Exasperation? Part one of two part look at new retirement savings legislation. Listen Now »
Related Podcast:
SECURE Act 2.0 (pt. 2) In part two of our two-part look at SECURE 2.0, we focus on provisions most applicable to the 403(b) and educators. Listen Now »
Related Podcast:
SECURE ACT 3.0 — Horrified by complexity of SECURE Act 2.0 and saving for retirement in general, Dan and Scott devise a better way to save for retirement, medical expenses and college. Listen Now »