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Laws regarding retirement savings plans don’t change all that often or all that much. Occasionally, new regulations are issued mandating disclosures that no one ever reads – and inflation-adjusted contribution limits tend to inch up each year. However, there is one phenomenon that has been increasing over the past decade, and Congress is finally starting to address it.

This phenomenon is that retirees are living much longer than in the past. According to Olivia Mitchell, Wharton professor of business economics and public policy, demographers have reported that the baby who will live to be 200 has already been born. Because few people plan on 40 years (or more) in retirement, increasing numbers of retirees rely solely on Social Security benefits during their final years. As a result, many retirees begin to struggle financially right about the time when their health is failing and they need long-term assistance.

To help avoid this problem in the future, Congress is looking at ways to align retirement plan provisions with longer life expectancies.

In May of this year, the House of Representatives voted 417-3 to pass a bill titled the Setting Every Community Up for Retirement Enhancement Act of 2019 (Secure Act). While the bill offers a wealth of provisions designed to enhance retirement plans, its primary goal is to enable Americans to maximize their savings for long-term retirement income.

The following are some of the key provisions of the Secure Act:

• Eliminates the maximum contribution age of 70½ for various retirement plans
• Delays the age when participants must begin taking required minimum distributions (RMDs) from 70½ to 72
• Enables employer ability to offer an annuity option in retirement plans
• Requires plan sponsors to provide an annual calculation of how much retirement income may be generated based on each participant’s account balance
• Requires long-term, part-time workers to have the option to participate in the company retirement plan
• Requires retirement account balances to be distributed as taxable income to named beneficiaries within 10 years of an IRA owner’s death

While the Secure Act is being considered in the Senate, this branch of Congress also has been working on a bill to enhance retirement plans. The Senate’s Retirement Enhancement and Savings Act of 2019 (RESA) does not include provisions for part-time workers or increase the age for RMDs, but it does offer the following provisions:

• Encourages wider availability of multiple employer plans (MEP) for retirement plan access for small business workers
• Eliminates the 10 percent auto escalation cap on salary deferrals under an automatic enrollment safe harbor plan
• Establishes up to a $500 per year tax credit for small business owners to help defray the cost of implementing automatic enrollment in a new retirement plan (or transition a current plan)
• Repeals the maximum age (currently 70½) for traditional IRA contributions
• Requires retirement account balances to be distributed as taxable income to named beneficiaries by the end of the fifth calendar year following the year of an IRA owner’s death

These bills reflect three important changes that could address the issue of providing income over a longer lifespan. First, the new legislation would allow seniors who work past traditional retirement age to continue making contributions to a traditional IRA, up to the annual limit.

Second, delaying the age at which tax-deferred retirement account owners must being taking required minimum distributions would allow those investments more time to grow.

And finally, annuities are increasingly being recognized as an additional guaranteed income source for life (similar to Social Security, only guaranteed by the insurer rather than the government). The Secure Act offers a provision to ease the liability a plan sponsor assumes in selecting annuity providers, which may incentivize more employers to offer a retirement plan annuity option.

While the two bills are somewhat different, bipartisan support in both houses of Congress signal that there may be enough consensus to pass retirement legislation reforms by the end of the year.

Members of the college graduating class of 2017 owed an average of close to $30,000 each in student loan debt. Imagine starting out adult life with that kind of debt load?

The prevalence of this type of mounting debt for a 21- or 22-year-old is unprecedented in U.S. history – and all the more reason why young adults need sound financial advice. Financial advisors might not necessarily market to this demographic; instead, waiting until they’re older and have assets worth their while. However, if today’s young adults don’t get off on the right financial footing with regard to managing debt, saving, budgeting and investing for the future, there won’t be that many in need of financial advice once they hit middle-age.

The following are a few tidbits of advice to help recent college grads develop successful money management habits.

Be Patient

Interestingly, many college graduates know they are in over their heads and welcome financial advice; in fact, they’re hungry for it. A recent survey found that the No. 1 goal for 94 percent of Millennials is to become debt free. Unfortunately, tackling thousands of dollars in debt while earning an entry-level salary is a difficult task. The first rule of thumb is to be patient.

It takes time to pay off that much debt. The best advice is not to develop expensive habits, such as buying an expensive car, one with poor gas mileage or a make that is known for expensive repairs. Don’t get into the gourmet coffee habit. Bring your lunch to work. These are common habits among young adults with little discretionary income, but the hard part might be refraining from this type of spending once they start earning a higher salary.

Any wage increases or monetary windfalls should be directed to paying off debt and establishing an emergency savings fund to cover three to six months of living expenses – just in case they get laid off or encounter a large, unexpected expense.

Be Disciplined

Just as it takes time and patience to pay off a large debt, it also takes time and patience for invested money to compound. Once debts are paid off, extra income should be devoted to a regular, automated savings plan, such as a tax-deferred retirement plan with a company match.

Here’s an example of the reward:

• Madison starts investing $10,000 a year at age 25 for 15 years, for a grand total of $150,000. At age 40, she stops and never returns to that investment habit.
• Aidan starts investing $10,000 a year at age 35 and continues that habit for 30 years – twice as long as Madison. His total contribution also is twice that of Madison’s, at $300,000.

By age 65, Aidan’s investment grows to $790,582. While Madison invested only half as much as Aidan, by age 65 her investment grows to $998,975 – $208,392 more than him (assuming a 6 percent average annual return). That’s what the power of compound interest can do for a new college graduate who starts saving young.

Be Diligent

Compound interest works both ways, so it’s important that young adults don’t miss or make late payments on student loans or other debt. Such bad habits lead to negative information being reported on their credit report, resulting in a low credit score that can cause them to be turned down for loans or charged higher interest rates. It can even mean losing out on a job opportunity, as some employers check out candidate credit scores.

Above all else, young college graduates need to make debt payments on time, build a credit history and protect their credit score.

Ideally, no matter how large debt payments are or how little a new college grad earns, a young adult should get in the habit of saving the same amount of money each month. Even if it’s just $20 a paycheck; it’s not the amount that matters – it’s the habit.

The best way to accomplish this is to live below your means. When you get a salary increase, increase your monthly savings amount. The easiest way to entrench a savings habit is to “keep living like you’re still a college student.”