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Could a bill passed by the previous Congress make it easier to save for retirement?

ROB SCHMITZ, HOST:

Over the holidays, President Biden signed a $1.7 trillion spending bill, and it includes provisions that are meant to help U.S. workers set aside more money for retirement. NPR's Arezou Rezvani has been looking at the finer details and joins us now to talk about what's changing. Hi, Arezou.

AREZOU REZVANI, BYLINE: Hi, Rob.

SCHMITZ: So tell us, what are some of the more notable changes coming down the pike?

REZVANI: So there are several. One big change requires many employers to automatically enroll employees in retirement plans, like 401(k)s, unless employees opt out. Contributions will increase by 1% each year until hitting a maximum of 15%. For certain low- to middle-income workers who make up to $71,000 a year, they may receive a matching contribution from the federal government of up to $1,000. And for those saddled with student loan payments, under the new bill, those payments now count as retirement contributions and qualify for an employer's matching contribution. And then there's also a big change for those with a bigger nest egg. The bill would eventually allow retirees to wait until age 75 before taking required minimum annual distributions, and that's up from 72 years old.

SCHMITZ: So I assume that if you're going to wait until you're 75 before you take the required minimum distribution, that there is some sort of incentive for doing so. Why would someone want to wait to get that money?

REZVANI: Yeah, that's right. So as opposed to many of the other measures, this one is designed to help people who already have more money set aside. And it's part of what's been a big push in recent years to delay those required distributions because of taxes. Monique Morrissey, an economist with the Economic Policy Institute, she put it this way.

MONIQUE MORRISSEY: Delaying the time when you need to take out required minimum distributions from your 401(k)s helps higher-income people because people who can afford to wait until they're 75 to spend the money are people who are really hoarding the money. And likely, a lot of that money will be inherited by their children, who then also get a tax break.

REZVANI: So tax breaks - that's what it's all about there.

SCHMITZ: Got it. Well, why is the government doing this at all?

REZVANI: Well, the picture of retirement in America is pretty grim. Currently, about half of U.S. workers do not have access to any retirement plan at work. And there's typically a legitimate reason for it. Many can't afford it. Or they have to pay down debts. And while many of the provisions we just talked about are meant to help those who have access to plans, experts say this is also a major step forward, bringing more people into the fold.

SCHMITZ: And what about those who do have retirement savings? How are they doing?

REZVANI: You know, the picture is kind of troubling there, too. The median balance in a worker's retirement account by age 65 is only about $88,000, according to the investment company Vanguard. That means living on about $730 a month for the next 10 years of retirement. And this helps explain why more Americans are working well past the typical age of retirement. The Bureau of Labor Statistics estimates that by 2030, the number of people 75 and older who will be working or looking for work will basically double. Now, these changes will cost the government and the taxpayer, an overhaul like this always does. But the alternative of having an aging population unable to support itself has its own costs down the line.

SCHMITZ: That's NPR's Arezou Rezvani talking to us about the forthcoming changes to retirement plans. Thanks, Arezou.

REZVANI: Thanks, Rob.

(SOUNDBITE OF UKDD AND SLUG'S "OVERBOARD") Transcript provided by NPR, Copyright NPR.

Rob Schmitz is NPR's international correspondent based in Berlin, where he covers the human stories of a vast region reckoning with its past while it tries to guide the world toward a brighter future. From his base in the heart of Europe, Schmitz has covered Germany's levelheaded management of the COVID-19 pandemic, the rise of right-wing nationalist politics in Poland and creeping Chinese government influence inside the Czech Republic.
Arezou Rezvani is a senior editor for NPR's Morning Edition and founding editor of Up First, NPR's daily news podcast.