At Nationwide, we have historically served as an advocate for the retirement security of American workers and investors. We remain committed to supporting efforts to improve the existing retirement savings system through regulatory changes that help more people achieve secure retirement outcomes.
For financial professionals and advisors, that task has become more difficult due to the COVID-19 pandemic. Over the last 12 months, many Americans experienced a drop in their financial security. In a recent Nationwide Retirement Institute® survey of 500 advisors and financial professionals, 77% said their clients had either stopped or slowed their retirement plan contributions due to COVID-19. Half of those we surveyed said their clients’ financial security had been negatively impacted by COVID-19.
Now that our country is emerging from the pandemic, advisors and financial professionals are turning their focus to helping clients get back on track toward their retirement goals. To further these efforts, Nationwide is supporting SECURE Act 2.0, proposed legislation that would make it easier for Americans to improve their financial security. In December, I had the opportunity to testify before a U.S. Senate Sub Committee in support of the bill.
Addressing today’s challenges
Following the success of the SECURE Act of 2019, advisors and financial professionals show strong support for the new legislation; 93% are in favor of passing SECURE Act 2.0, with a majority agreeing that the legislation’s proposals would benefit their clients financially.
SECURE Act 2.0 builds upon the momentum of the 2019 legislation. We’ve summarized some of the more important new provisions here. The proposed legislation includes new and revised rules that address some specific challenges currently affecting Americans’ financial security.
For example, student loans remain a significant hurdle for many workers, impacting their ability to purchase their first home or to begin saving for retirement. One provision in the SECURE Act 2.0 would allow employers to match contributions for 401(k), 403(b) and SIMPLE IRAs while employees pay off outstanding student loan debt. In our survey, 93% of financial professionals agreed this proposal would go a long way toward helping their clients improve their financial security.
A majority of advisors and financial professionals also agreed that clients would benefit from boosting retirement plan catch-up contribution limits to $10,000 for workers over 60 and raising the age to begin required minimum distributions (RMDs) to 75. These proposals are part of the current draft of the SECURE Act 2.0 legislation.
Our poll also found strong support for a provision to allow the inclusion of exchange-traded funds (ETFs) to variable annuity investment menus. Of the financial professionals we surveyed, 78 percent said this addition would be beneficial for their clients.
A new emergency savings option
Our Retirement Solutions business witnessed the impact of the COVID-19 emergency first-hand, as many people tapped their retirement savings to help bridge the financial gaps brought on by the pandemic.
Early retirement withdrawals may not be a good idea for several reasons; they can come with significant tax consequences and investors risk locking in losses at market lows. But without an easy way to build emergency savings, many workers see their retirement account as a viable option when faced with a pressing financial need.
A better option would be an emergency savings component that’s part of an employee’s retirement plan, which would allow savers to withdraw funds without penalty. There’s broad support among advisors and financial professionals for this idea; 91% of those polled in our survey believe a provision addressing this challenge should be added to the SECURE Act 2.0 legislation.
One step further
The first SECURE Act was a tremendous step forward in removing many obstacles that Americans face when saving for retirement. SECURE Act 2.0 would go one step further by addressing several specific barriers to achieving a more secure financial future. This infographic explains how the provisions of the SECURE Act 2.0 will help financial professionals and their clients do just that.
At Nationwide, we’re encouraged to see bipartisan support taking shape on Capitol Hill for this important piece of legislation. I am also encouraged by the strong support we see for the proposed SECURE Act 2.0 legislation in the financial community. Advisors and financial professionals serve on the front lines in helping American workers and families improve their financial security. The pandemic only underscored the valuable guidance they offer their clients.
Nationwide will continue to demonstrate our commitment to helping American workers and investors achieve better retirement outcomes by supporting financial professionals with the products, knowledge and resources they need to help clients realize their financial goals.