The year 2025 seems to be a pivotal year for a variety of demographic paradigms. First, we’ve written about the university enrollment cliff in Colleges & University Death Spiral that will occur starting in 2025.
We’ve also noted that the boomer population will start their retirement “metastization” around 2025 and wrote about it in Fed Pause, Demographics and Inflation.
One of the questions we’ve been asking ourselves is the following: If more and more baby boomers are going to start retiring and pulling funds from their 401ks, pensions, and other retirement savings then where will the money come from to offset those withdrawls?
The Secure 2.0 ACT will begin to make 401k contributions mandatory in 2025 almost as if by design to offset all those retiring boomers and to offset the sudden decline of college age people coming into the labor force. From US News:
New 401(k) plans will soon be required to automatically enroll participants in the plan. This provision of the SECURE 2.0 Act, which was passed in December 2022, is designed to increase employee participation in retirement accounts.
The SECURE 2.0 Act automatic enrollment provisions include:
Source: Money.USnews.com
- Beginning in 2025, employers with new 401(k) and 403(b) plans must automatically enroll employees when they become eligible.
- The initial contribution amount must be at least 3% and no more than 10%.
- Contributions increase by 1% each year until reaching at least 10%, but not more than 15%.
- Existing 401(k) and 403(b) plans are grandfathered.
- Small businesses with 10 or fewer employees, businesses newer than three years old, and church and government plans are exempt.
- Individual employees may opt out of the automatic enrollment.
As if by amazing clockwork, a new law passed will help fill a gap created by retiring boomers and insufficient kids enrolling in college and entering the work force. Will it be enough?
To find out, stay tuned, stay profitable and stay solvent…