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How Biden’s New Stimulus Bill Affects Your Retirement Savings

That’s right, another new stimulus bill passed. Biden’s first major legislative move as President is a $1.9 trillion relief plan. And it’s the first federal relief measure for Americans hit by COVID-19 since December 2020. 

The U.S. House of Representatives passed the American Rescue Plan on Feb. 26. It passed the Senate on March 6, with changes that the House then had to re-vote on to approve. Biden signed the American Rescue Plan into law on Thursday, March 11. 

What the American Rescue Plan Means for Your Retirement Savings Plan

Compared with the previous two bills, the third stimulus package contains fewer direct benefits for retirees and people who are saving for retirement. 

  • March 2020’s CARES Act waived the withdrawal penalty for IRAs and 401(k) retirement accounts and froze RMDs for 2020 (RMDs are back for 2021)
  • In December 2020, Coronavirus Stimulus 2.0 granted added tax cuts for charitable contributions, allowed carry-forward on Flexible Spending Accounts (FSAs), and banned surprise costs for emergency care

This plan is designed for relief on a broad scale, and that could have a ripple effect on your ability to keep your retirement savings on track. Here’s what’s in the American Rescue Plan, and what it could mean for your retirement investment accounts.

$1,400 Stimulus Checks 

For this round of stimulus checks, there’s a new income cutoff that will reduce the payout for millions of Americans. Individuals making up to $75,000 and married couples making up to $150,000 will get $1,400. Above that, the payment gradually phases out until disappearing entirely at the new income cap of $80,000 (individual) or $160,000 (married). The IRS has already begun distributing checks.

This round of stimulus checks includes adult dependents as well as children, which is good news if you claim a college-aged child or elderly parent as a dependent. Families with mixed-status citizenship also qualify this time, having missed out on the two previous rounds of stimulus money.  

Unemployment Benefits Extended Again

The federal emergency unemployment boost of $300 per week bonus (on top of whatever your state pays) continues through September 6. Households earning less than $150,000 a year will also pay fewer taxes on unemployment money than before. 

Child Tax Credit Expanded

Child care costs have been a big challenge for parents throughout the pandemic. This year, the child tax credit bumps from $2,000 per child to $3,000 per child ($3,600 for a child under age 6) and makes 17-year-olds qualifying children for the year. For low and middle income families, this means more money to pay for child care. There’s also money to help hard-hit child care providers cover their costs.

Much-Needed Pension Reform 

The legislation includes the Emergency Pension Plan Relief Act of 2021 (EPPRA). A major win if you have or plan on getting a pension, EPPRA includes financial help for underfunded multi and single-employer pension plans. More good news for retirement savers—the American Retirement Association successfully lobbied to remove a proposed freeze on annual cost-of-living adjustments (COLAs) from the act.

More Resources to Fight The Pandemic 

Vaccines are humming along, and the government wants to keep it that way. The bill includes more pandemic-fighting funds for local and state governments, schools, and the Federal Emergency Management Agency (FEMA). Plus major funding for continued vaccine distribution, as well as coronavirus testing, contact tracing, and support for frontline workers.

Health Care Coverage Incentives

Health insurance coverage through COBRA has been extended for those who lost jobs due to the novel coronavirus. The Affordable Care Act got a boost in the form of an increased tax credit when you buy an ACA-compliant plan. And there’s a big lump of funding aimed at encouraging states to expand their Medicaid programs.

More Assistance for Small Businesses

If you’re a business owner or freelancer whose income took a hit during the pandemic, the bill slated an additional $7 billion for the Paycheck Protection Program (PPP). PPP loans are potentially 100% forgivable, and many first round loans have already been forgiven. 

The Economic Injury Disaster Loan (EIDL) fund also received a $15 billion cash injection under the new plan. And $25 billion went to a new Small Business Administration program focused on supporting food and drinking establishments. There was no minimum wage increase.

Keeping Your Retirement Plan on Track 

It can be tough not to feel added worry about your retirement plans when the near term feels so uncertain. But remember, a solid financial plan is designed to withstand ups and downs so you can retire stress-free, despite the twists and turns of life.

If you’re worried about your finances or sticking to your retirement savings plan as you bounce back, talk to your financial advisor.  A fiduciary financial advisor will work for your best interests and help you protect your nest egg, now and in the future.

Does your retirement plan need a check-up? Download our free 2021 Essential Retirement Guide to find out the seven things you need to do before you retire.

2022 Essential Retirement Guide

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