The Secure Act 2.0

Q.

What’s in the “Secure Act 2.0” that might be passed by Congress? — G.W., Kankakee, Ill.

A.

The House of Representatives passed the bill in March, and the Senate is working on similar legislation. There’s a good chance that some combination of various plans will be passed by Congress this year.

Proposed legislation (as of early September) offers many provisions that can help Americans save for retirement.

For example: Employers that offer 401(k) or 403(b) plans would be required to automatically enroll all new, eligible employees, starting with a 3 percent contribution rate and upping that by 1 percent annually until it reaches 10 percent. (Employees can opt out, though.) Workers aged 62 to 64 would be able to make extra $10,000 “catch-up” contributions each year to their 401(k) or 403(b).

Required minimum distributions from many retirement accounts must now be taken starting at age 72, and the Secure Act 2.0 proposes raising that age to 75 by 2032. The act would also make it easier for retirement plans to offer annuities, which can provide lifelong income for retirees.

To learn even more, look up “Secure Act 2.0” online.

Q:

If a stock is priced at $0.80 per share but pays out more than $1 per share in dividends, is that a red flag? — P.K., Dallas

A:

It sure is. For starters, stocks trading for less than about $5 per share are “penny stocks.” They tend to be very risky and are well worth avoiding.

Dividend-paying stocks, meanwhile, should be generating more in earnings per share than they’re paying out in dividends per share.

Fat dividends are great, but the company may not be strong enough to sustain them.