The SECURE Act that was just signed into law will have a considerable impact on people saving for retirement.

Newsmax Finance recently spoke with Chris Orestis, Retirement Genius, to find out exactly how the new law could help retirement savers — and how much people should realistically save in order to live a comfortable retirement.

Newsmax Finance: People recently surveyed said they would need $1.25 million to be able to retire. That's a pretty daunting number for even highly paid employees. Could average workers save anywhere near that amount just by putting money away in a 401(k) or individual retirement account (IRA)?

Chris Orestis: Americans have grown understandably anxious about what it will take to retire today. Targeting an arbitrary number like $1.25 million is unrealistic and not the right approach.

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If a retirement saver could amass $500,000 by age 65, that would put them well above the national average. If you combine that with Social Security and Medicare benefits, other assets and part-time work in retirement, an individual could live at a reasonable level of financial security.
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According to a recent Federal Reserve Survey of Consumer Finances, the average amount in U.S. retirement accounts is $65,000. For people ages 55-65, it's $135,000, and for people 35 and younger, they have saved a mere $13,000.

Those savings numbers are nowhere close to good enough for someone to replace 70% of their peak income—which is a more realistic goal. If a person waits to start saving for retirement until age 35 they will need to save 24% of their income over the rest of their working years to hit the 70% mark, and if they wait until age 45 they would need to save almost half of their income to hit the mark!

Newsmax Finance: How high of a priority should retirement savings be for people?

Chris Orestis: Working towards retirement should be a very high priority from the moment a person gets their first job. If someone has access to a 401(k) plan, they should be maxing out their contribution from day one so they get as much pre-tax money into their retirement account as they can and also get the maximum matching contribution from their employer.

The money they will be saving will be growing tax-free until they start to tap into it in retirement—so this gives them decades to benefit from tax-free and compounded growth.

A person who starts saving for retirement in their 20s could conceivably have a 7-figure net worth in their 40s or 50s. You heard right. More than $1 million in savings, easily.

A person who waits to save for retirement until their 40s or 50s will never be able to catch up to the level.

Newsmax Finance: How does the SECURE Act address retirement savings?

Chris Orestis: The SECURE Act can help with a number of shortcomings for Americans who find themselves underprepared for retirement. Many people fail to understand what it really takes to be able to retire with financial security.

Key provisions of the SECURE Act include:

• Automatically enrolling employees in a 401(k) plan at a 3% salary contribution rate. With automatic escalation each year, that can grow up to 10% of salary;
• Catch up contributions to tax-deferred savings accounts that increase for people ages 62, 63, and 64;
• Age to start taking required minimum distributions (RMD) increasing from 72 this year to 75 by 2032; and
• People with student loans qualifying to receive employee matching contributions to their loan payments.

The good news for workers in their 50s is that SECURE Act catch-up contribution increases allow them to contribute an extra $7,500 a year to their 401(k), up from the current $6,500, and it would create a new level for catch-up contributions for people 60-63, setting it at $11,250 beginning in 2025.

The annual 401(k) contribution limit in 2023 is $22,500. But for people aged 50 and older, they can contribute an additional $7,500. By increasing the amount for catch up contributions to $7,500 starting at age 50, this gives people who take full advantage of the higher limit a chance to save an additional $112,500 of pre-tax money by age 65. Based on 2023 numbers, that means a person maxing out their 401(k) starting at age 50 until age 65 would put away $450,000 of pre-tax money over 15 years.

That is a very sizeable and impactful amount of money, especially if it is wisely invested.

If a person could get to around $500,000 saved in retirement accounts by age 65, that would put them well above the national average. If you combine that with Social Security and Medicare benefits, and possibly other income from assets such as home equity, and even the ability to continue to generate income into retirement, a retiree could live at a reasonable level of financial security.

Newsmax Finance: Is there anyone who shouldn't prioritize saving for retirement?

Chris Orestis: The short answer is an emphatic, no! Everyone should be prioritizing retirement savings in their life, and people shouldn’t blow off saving for the future thinking that they will invent the next Google, inherit money, or that they will be married and cared for by someone else.

When it comes to planning for a secure and well-balanced retirement, it is OK to hope for the best in your future—but the smart strategy is to plan to stand on your own.

Remember, the average monthly Social Security benefit today is about $1,600—good luck living on just that! Once people turn 65, Medicare will cover their health care needs, but not long-term care. LTC is not free, and it will require premium payments and ongoing out-of-pocket costs.

Nesmax Finance: Why don't people save enough for retirement? Don't they think about their future, especially when they see how their parents and grandparents may be struggling?

Chris Orestis: The big barriers to saving for retirement are racking up debt, carrying school loans, paying expensive rent, excessive spending, and just winging your cost of living by not living on a manageable budget. The key to getting a strong start is to max out your 401(k), avoid debt, and to buy a property and build equity instead of renting and paying for someone else’s equity.

Don't forget about the value of consciously staying healthy to avoid expensive health problems later in life. Just one health roadblock can wipe out a person’s savings very quickly.

The key to building and then living a secure retirement is to start as early as possible, and to be empowered by the knowledge that it is never too late. The SECURE Act recognizes this reality by increasing the opportunities for people to start saving from the earliest point possible, and also by providing increases in the amounts people can save as they are getting closer to retirement.

So my message to all those saving for retirement, wherever they are on that road and however successful they may or may not be today, is: Get started and look optimistically to a fruitful and secure life ahead.
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Chris Orestis, Retirement Genius is a nationally recognized senior care advocate and expert in retirement, long-term care and specialty senior living funding solutions. The author of two books, numerous published papers and articles, and a frequent industry speaker; he is the innovator that brought the LTC Life Settlement into the market over a decade ago.