Hello, everyone and welcome back to a new video shawn's, the name and today we're going to be talking about 401ks and retirement in general. There is a brand new bill that is heading to president biden's desk by the end of 2022. It has some major implications if you have a 401k or even if you don't have a 401k, and i want to talk about it in this video and yes, we do have a little bit of a new backdrop new little setup. I apologize for not posting a whole lot of videos in the past month or two we've been setting up a whole new office.

I'm excited to bring a whole bunch of new content. Your way, starting with this one anywho 401ks. This new build is called the secure 2.0. I'm actually going to be referencing a cnn business article that covers it very well, but it's essentially a new bill that is hitting president biden's desk by the end of 2022, and it has some major major changes to the 401k and most people have heard of a 401K before, but they don't really understand what it is, it's essentially a deferred tax account.

It is not a tax-free account. It is a deferred tax account. That means that the money you make now you can throw a certain amount up to a limit into an account where you don't get taxed on that money that you made now you get taxed at a later date. Now, what's the point of this? Well, when you're working, you are supposed to be making a lot more money when you're actively working than you are when you are retired.

So, for example, if you are in a 40 tax bracket right now, because you make a ton of money, you want to be saving on the amount of money you're paying to the irs you're going hey. You know i'm going to max out my 401k this year. I'm going to put 20 grand into this account, i'm going to be taxed 20 grand less on my income and then, when i go to actually take that money out when i'm 75 or 80 years old, i'm going to be making a lot less than i am Now and so the tax bracket that i'm in maybe i'm no longer in a 40 tax bracket, maybe i'm in a 20 tax bracket. So now i'm getting taxed less on the money that i'm pulling out of my account, thus saving me tons of money.

That's the idea of a 401k now a lot of people don't actually use 401ks, or maybe they do, but they don't actually contribute a whole lot to it. And this bill is supposed to basically incentivize more people to use 401ks, and the reasoning of that is actually pretty interesting so way back in the day when retirement was kind of designed, i guess by our politicians, even though it's horribly made it's essentially a three stool Or a three-step process, when you go to retire, you mainly have a 401k, your social security benefits and potentially a pension. Now i don't know about you, but no one really gets pensions anymore. I've seen almost no new employers offer pensions, they just pretty much don't exist and then the next step on the list is a social security benefits.

Now everyone gets social security benefits and the problem is that most people who are retired are living solely off of this one stool or this one leg of the chair, and i don't know if you've seen social security benefits, but it does not pay very well. The cool thing about doing mortgages is that i get to work with people and how much they make and how much they can afford, and most people who are retired are living solely off of their social security benefit income, and it is so little it's. It's actually ridiculous, so the fact that ninety percent of americans are living off of their social security benefit income is a problem, and that's why secure 2.0 or this new bill is trying to boost that last leg. The 401k leg of someone's retirement.

Now i'm gon na want to know your opinions on this in the comments down below, because i'm going to talk about all the changes that are coming to 401ks and me personally. I think they are great changes coming to it. I know everyone can kind of be super. Pro 401k super con 401k.

I personally love them and when i go over these updates again, i want to know your feedback in the comments down below, but the first change that's coming to a 401k and in my opinion, it's the biggest and most prominent thing that is changing is the fact That employers are going to be required to do automatic enrollment for 401k. So right now, if you have an employer who offers a 401k program, so at x2 mortgage my company, we offer a 401k program and it's great. We do a match and most companies should do a match and most companies who don't yeah, i think they've got problems, but most companies who offer a 401k. It is not mandatory to actually enroll in that 401k program, so most younger people, typically under the age of 30, they start working in the workforce, they start making decent money and they want as little deductions as possible because they're single they're having fun they want to Make more money right, so they opt for very cheap medical plans.

They usually don't do 401ks. You know all that good stuff. Now the problem with that is the sooner you start a 401k, the more money you're going to make in the long run, because it's not necessarily how much money you put into the account it's more. So how long you've been putting money into the account right? And that's like any investment account really, but it's more prominent in 401ks, because it's not the richer.

You are the bigger. Your account is everyone's capped at how much money they can put into that account every year, so, whether your person, a making 100 grand a year or person b making a million a year, they can still only contribute the same amount every single year. So it's really a matter of who started their 401k earlier and who has not missed maxing it out every single year, that's going to determine who has the most in their 401k by the time they retire. So the fact that 401ks are going to have automatic enrollment.

This is huge. That means the second you get employed by an employer who has a 401k you automatically get enrolled into that program. Now some of you might be thinking well, what? If i still don't want to do a 401k? Maybe i want to take that money now, maybe i'm in a lower tax bracket. Maybe i want to do a roth.

Maybe i want to invest in real estate. Maybe you want to invest in stocks or whatever you want to do. That's totally fine! When you get automatically enrolled, you have the ability to just not put any money into that account. You can basically just auto unenroll, but the fact is is the default is now to be enrolled versus not enrolled, and this is big and then taking that one step further, which again, i think, is cool most people, probably don't is that you start when you're auto Enrolled your start at a three percent.

Basically, i guess deposit into that 401k account based on yearly salary. So if you make 100 grand a year, three grand a year is going into that account and then every year after that, it's gon na continue to go up by one percent until it hits a cap. Now again, this is great for the people who don't know what they're doing they're going to automatically be enrolled into a great program where they're going to be saving for their retirement without even trying. Now.

The second change that's coming to a 401k, which isn't, as i guess apparent in my opinion, it's great for people who are older, who are trying to catch up. Like i just said. If they didn't start early, then their 401ks are going to be a lot smaller or a lot. I guess lower in value than someone who started earlier so they're, basically increasing the amount of catch-up contributions that you can do, i'm not going to dive into this one too much.

If you don't know about catch-up contributions, you can look it up. It's essentially just stating, if you didn't start early, we're going to allow you to put more money than the max of the person. Next you when you get older. So, while that's cool and all i think, the next part of the bill is actually going to be way more beneficial to most americans and it's the fact that you can basically pay off student loans and your employer will match you.

So let me break this down. Most people in america have tons of student loans, and i see it all the time when people apply for mortgages they're very normal everyone's trying to get them deleted. But one thing that i think is very cool is the fact that if you're going to be making payments on your student loans, your employer is going to be required if they have a match to basically match your contributions into your student loans. But instead of paying down your student loans with you, they're going to be instead matching that into your 401k, this is mega cool okay.

So let me give you an example: if someone were to pay a thousand dollars in student loan, debt down, they're, gon na say hey. Look. I owe 20 grand i'm going to spend a thousand this year. You can put a thousand in your student loan debt and then, if your company has a six percent match, they're gon na they're gon na match you six percent on a thousand dollars into your 401k.

So they're basically going to put 60 into your 401k for free because you're paying down your student loans. This is super cool because it solves the massive debt crisis that we have in our country, but also still rewards you by giving you essentially tax free, but most mostly tax deferred money into a retirement account that you can cash in on later. So not only are you paying off debt but you're saving for your retirement at the exact same time, that's like a financial nerds like absolute dream. Is you get to kill two birds with one stone, so super cool that they're doing that and we'll see if the bill actually gets passed? Oh wait and then two more smaller things that happen with the bill that are worth mentioning is the fact that you essentially um you know, can have delayed mandatory withdrawals.

So what that means is, once you reach a certain age right now you have to start taking withdrawals from your 401k, which is good sometimes, but could be also very bad if you're still making tons of money and you're being required to withdraw some of this money From your 401k now you're getting taxed on even more income, where it's doing the opposite of what a 401k should be doing, or maybe you're just retiring later, and you don't want that money. But now you can. Basically, you know delay when you can actually start pulling from that account which is pretty cool and then the other thing that more people might find more attractive. Is that if you are a part-time worker, you can actually contribute to a 401k plan which previously you could not do if you were not a full-time employee, you cannot have a 401k plan now, if you're, a part-time employee and you meet certain restrictions, you have to Work a certain amount of hours and and work at the employer for a certain length of time you can contribute to a 401k plan which is super cool.

It's not leaving the little guy a little guy who's doing part-time work in the dust. So i think that's really cool benefit as well. Those are the main changes coming to the united states 401k plan. Now is this bill gon na get passed? I have no idea.

I believe this bill was actually in the works when trump was in office now biden's in office. Who knows if it actually gets passed again, i'm from an employee and an employer standpoint, and i think these are all great benefits and there's really no downside to it. Yes, you get automatically enrolled, but again you can immediately opt out of it and not contribute. That's not a problem at all.

I think the fact that there is nothing taught in schools about financial literacy. Most people don't know the benefits of a 401k. If you don't make a ton of money - and you don't have basically a lot of money to have like a financial advisor or someone to walk you through these things, all you really have for financial education is youtube or the internet and a lot of stuff on The internet is incorrect, so i think that's big, i'm all about you, know financial literacy and making sure people are making the right financial decisions now. Does the employer basically take more money out of their pocket because of this? Yes, technically, if they've got a match and someone were to not contribute to a 401k plan and now they're by default, contributing yes, it's more money out of the employer's pocket, but in all honesty the employers should have their employees best interest in mind.

And that's always the way i've gone about, structuring anything. If you don't even have your employees best interest in mind, then you're, not gon na. Have your customers best interest in mind and overall you're, not gon na build a successful company so again from an employee and an employer standpoint. I think these changes are phenomenal and hopefully it does get passed.

If you do see it again, it's called the secure 2.0 bill and it's relatively new in terms of media. I guess attention i've been following it a little bit before and then i saw cnn post it and i'm, like you, know what let's just make a video on it. It's a little bit unique than what this channel usually does. But again we got a new setup.

So hopefully, there's going to be some new content and some more content in general coming you guys either way. I hope you enjoyed the video. If you did please hit the like button. Please comment down below, please let me know your thoughts on this bill.

I would love to hear it down. There share the video with a friend who maybe needs to learn more about 401ks or maybe an employer. You know um, i always love when you guys share my stuff. Otherwise i will see you guys.