As we hit the Fourth of July and hope you enjoy the holiday, we are also at the halfway (and approaching the hottest) point of 2023.
We thought it’s the perfect time to take a look at some of 401(k) Specialist’s hottest articles so far this year, on topics ranging from the very recent Supreme Court striking down President Biden’s student loan forgiveness plan to Social Security reform and 2024 COLA forecasts, key provisions of SECURE 2.0, the debt ceiling debate, 401(k) and HSA contribution limits, proposed retirement legislation, fiduciary lawsuits, SEC and DOL regulatory efforts, and the ever-popular “best places to retire” rankings.
So without further ado, put down that hot dog, apple pie or sparkler for a second and check out these hot stories (in no particular order) from the first half of 2023.
2024 401(k) and HSA contribution limits
• 2024 401(k) Contribution Limit: Milliman Forecasts Modest Increase
In June, Milliman’s latest 2024 IRS limits forecast predicts the 2024 IRS contribution limit for defined contribution retirement plans will be raised by $500 to $23,000. It also forecasts that there will be no increase next year to the catch-up contribution limit for DC plans, currently at $7,500.
The IRS is expected to announce official 2024 401(k) contribution limits in mid- to late-October. This year, defined contribution plans got a historic contribution limit boost—the largest increase ever in terms of dollars and percentage, just under an unprecedented 10%. The $2,000 increase raised the 401(k) and 403(b) contribution limit from $20,500 to $22,500, and the catch-up provision for participants aged 50 or over increased from $6,500 to $7,500, totaling $30,000 in employee contributions alone.
• HSA Contribution Limits Get Biggest-Ever Boost for 2024
In May, the IRS announced that Americans who have health savings accounts will be able to sock away more money into them than ever in 2024.
The annual contribution limit in 2024 will jump to $4,150 for self-only coverage (up from $3,850 in 2023) and $8,300 for family coverage (up from $7,750 in 2023). The inflation-adjusted amounts mark the largest-ever increase to the amount of money that can contributed to the triple-tax advantaged accounts each year. The increases are detailed in IRS Revenue Procedure 2023-23 and go into effect in January 2024.
HSA account holders age 55 and older can contribute an extra $1,000, which means an older married couple could sock away $10,300 a year, up from $9,750 this year.
Social Security COLA forecast
Our continuing monthly coverage of 2024 Social Security cost of living adjustment (COLA) estimates continue to draw plenty of interest.
While the next update will come when the Bureau of Labor Statistics releases June inflation data on July 12, the most recent update showed The Senior Citizens League forecasting the 2024 COLA to be 2.7%, far below this year’s historic inflation-fueled 8.7% increase.
The official 2024 Social Security COLA will not be determined and announced until October.
• 2024 Social Security COLA Tracker: Latest Estimate Dips Below 3%
• 2024 Social Security COLA Projection Now at 3.1%
• New Inflation Data Shows 2024 Social Security COLA Still Headed Below 3%
• 2024 Social Security COLA Could Drop Below 3%
Social Security reform coverage
Unless Congress stops kicking the can down the road and actually musters the will to do something about it, within a decade all Social Security beneficiaries will face a 23% automatic cut. That would reduce the average annual benefit by around $6,000—or $500 a month.
The Social Security Board of Trustees annual report released at the end of March revealed that the Old-Age and Survivors Insurance and Disability Insurance (OASI) trust fund, which currently pays benefits to about 57 million Americans, will become depleted by 2033 unless changes are made.
We have published several articles this year that resonated with readers about various proposals or legislative efforts to address the looming shortfall, listed (and hyperlinked) here from oldest to newest:
• Bernie Sanders Reintroduces Bill to Increase Social Security Benefits, Extend Solvency
• 4 Senators Want Americans to Wait Until 70 to Claim Social Security
• Latest Bill Pushes for Increased Social Security Earnings Limit
• 3 Proposals to ‘Fix’ Social Security
• House Republicans Propose Social Security Benefit Cuts
SECURE 2.0 legislation
It’s doubtful a week has gone by so in in 2023 where 401(k) Specialist hasn’t mentioned SECURE 2.0 and many of its 92 provisions in our coverage.
When the “SECURE 2.0 Act of 2022” was passed by Congress and signed into law by President Joe Biden in late 2022 as part of the broader Consolidated Appropriations Act of 2023, it instantly became one of the most significant pieces of retirement reform legislation to hit the books in decades.
Here are a couple of our most-viewed articles so far this year centering on elements of the legislation.
• Glitch-Fixing: How 2024 Catch-Up Contributions Could Be Restored in SECURE 2.0
When the American Retirement Association discovered a glitch in the text of the SECURE 2.0 Act of 2022 in January that—if not fixed—would eliminate the ability for 401(k) participants to make catch-up contributions in 2024, the alarm bells started ringing.
ARA immediately alerted the Treasury Department and the Joint Committee on Taxation to the issue, with the latter acknowledging that it does, in fact, appear to be a technical error.
So, with Congressional staffers and the Treasury Department aware of the problem and not wanting to create unintended consequences, they have essentially the rest of 2023 to fix it. While they will no doubt look to address the problem sooner rather than later, a legislative fix could end up being attached to another end-of-the-year, must-pass spending bill (much like the 2019 Secure Act and the SECURE 2.0 Act of 2022).
Absent such a fix, the IRS could step in and issue guidance to circumvent the glitch. Stay tuned.
• 6 Important SECURE 2.0 Provisions Retirement Advisors Should Know
Also in January, Vestwell Founder and CEO Aaron Schumm’s provided his take on key changes coming as a result of the new landmark retirement reform legislation.
Best places to retire
Lists of the “best places to retire” always tend to be popular among readers, whether the list focused on a particular cities, states or even countries. These two articles fared very well in particular, and for good measure we threw in a newer article that’s still climbing the charts:
• 10 Best and Worst States to Retire 2023: WalletHub
• 11 Best Places to Retire in the World in 2023: International Living
• 10 States Furthest From and Closest To Retirement Savings Benchmarks
Student loan coverage
Just last week, the Supreme Court closed out its pre-summer 2023 session by releasing its opinion to strike down President Joe Biden’s controversial student loan forgiveness plan.
Between coverage of that plan and its legal challenges, the recent debt ceiling bill that mandated the end of the 3-year-plus pause on federal student loan payments, and a SECURE 2.0 provision to help workers accumulate savings through their employer’s 401(k) match while making student loan payments, student loan debt and its impact on retirement savings has been a popular topic so far this year. Here are some of our most-read articles on the subject:
• Unforgiven: Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan
• Supreme Court Still Quiet on Student Loan Forgiveness Fate
• Supreme Court Ruling on Biden’s Student Loan Forgiveness Expected by End of Week
• Debt Ceiling Deal: Social Security Payments Likely Not Delayed; Student Loan Payments to Resume
• Debt Limit Standoff: Are Social Security Benefits at Risk?
Legislation and regulation
There have been a number of developments coming out of Washington D.C. regarding potential retirement reform legislation or regulation. From Here are some of the articles that drew a lot of eyeballs:
• Biden’s Budget Seeks Ban on ‘Mega-Roth’ IRAs
• Florida Court Strikes Down DOL Rollover Guidance
• SEC Risk Alert Identifies Reg BI Compliance Issues
• House Financial Services Committee Passes Bill Approving CITs in 403(b)s
Best of the rest
Here are some of the other articles (and podcasts) that really resonated with readers during the first half of 2024:
• American Airlines Pilot Sues Company 401(k) Over ‘Woke’ ESG Investing
In a case sure to be closely watched by the retirement industry, a senior American Airlines pilot is suing his employer, arguing that the company’s 401(k) plan—one of the largest in the country—picks investments that pursue “leftist political agendas.”
If allowed to proceed to trial, Spence will call on the court to rule that American Airlines has breached its fiduciary duties under ERISA, and demand that the airline “make good to the Plan all losses that the Plan incurred as a result of their breaches of fiduciary duties, and to restore the Plan to the position it would have been in but for this unlawful conduct,” and further demands injunctive relief to prevent further violations and mismanagement of the plan.
American Airlines’ 401(k) includes approximately 100,000 participants, making it one of the largest in the U.S. with around $26 billion assets, according to the lawsuit.
• George Fraser and Shlomo Benartzi: The Power of Pennies
Our Issue 1 2023 cover story shows how the elite advisor and famed behavioral economist are using “change” (instead of percentages) to dramatically change participant outcomes.
Fraser has found remarkable success by employing his “Pennies on the Dollar®” strategy, where he encourages reluctant participants by telling them they can build a retirement nest egg by socking away as little as one penny from each dollar of earnings, and increasing it by a penny each year until it hits at least six pennies of every dollar. The key here is how participants have reacted very positively to messaging using “pennies” as opposed to the standard “percent.”
• How to Build a 401(k) Practice by Cold Calling
Advisor Steven Wilkinson aims to prove a seven-figure practice can be built from scratch in 3 years—and he’s sharing everything about how he’s attempting it on LinkedIn.
“I literally started in August,” Wilkinson tells us. “If I don’t embarrass myself too bad, my goal is to basically try to build a million-dollar practice in 3 years—and share everything.”
He posts weekly progress updates with a purpose: “This weekly thing I’m doing, in my mind I’m breaking what I feel are limiting beliefs. Advisors have a limiting belief that cold calling doesn’t work. My LinkedIn goal is just to prove to advisors that ‘cold calling doesn’t work’ is a limiting belief. Yes, it’s hard, but everything worth having is hard. They can have a great life and make an impact for their clients by cold calling or outsourcing it to someone else.”
• Michael Kitces: Why Chat GPT Complements (Not Replaces) Advisors
The rapid emergence of artificial intelligence and Chat GPT specifically has raised a bunch of fresh questions about the role it will play in financial advice, and how it will impact the work and role of financial advisors moving forward.
High-profile advisor Michael Kitces—the “Chief Financial Planning Nerd” at Kitces.com, Head of Planning Strategy at Buckingham Wealth Partners, Co-Founder of the XY Planning Network, and face of the popular “Nerd’s Eye View” financial planning blog—has an interesting perspective on the topic of AI in financial planning and shares it with us on this episode of the 401(k) Specialist Pod(k)ast.