5 ways retirement changed in 2023

December 26, 2023 9:00 AM

Fewer retirement laws were passed in 2023 than in 2022, but it was still a year of many changes for the industry.

In terms of retirement, 2023 was a very different year from 2022. Gone were the legislative breakthroughs; nothing like Secure 2.0 or the Inflation Reduction Act made it to President Biden's desk. But it was still a year of significant changes — both good and bad.

For one thing, 2023 was the year Secure 2.0 and the IRA began to take effect, yielding both savings and side effects. The Supreme Court struck down Biden's student debt relief order, putting school loans on a collision course with retirement savings. The Department of Labor proposed a new rule that would extend the fiduciary standard to all retirement advice, stirring the fiercest controversy retirement has seen in a long time.

Meanwhile, changes percolated in the private sector as well. Retirement plan providers gradually adopted more automatic features, defaulting workers into higher savings. And as inflation and stock volatility battered retirement savings, more and more Americans turned to annuities for help.

As 2024 draws near, here's a look back at the biggest retirement news of 2023:

Inflation Reduction Act causes jump in Medicare Part D premiums

The Inflation Reduction Act was designed to make Medicare cheaper for seniors — and in some ways, it already is. But for Part D, which covers prescription drugs, it appears to be doing the opposite.

Seniors across the country are learning their Part D premiums will see a "dramatic" rise in 2024, according to a new study by HealthView Services. In California, Florida, New York, Pennsylvania and Texas, seniors enrolled in Part D plans from three of the largest Medicare providers will see their premiums jump, on average, by 42% to 57%.

"Significantly more expensive premiums will come as a shock to the millions of retirees enrolled in Medicare Part D plans who … may have been anticipating lower costs with the introduction of the Inflation Reduction Act," said Ron Mastrogiovanni, president of HealthView Services.

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Inflation Reduction Act is causing 'dramatic' rise in Medicare premiums, experts say

What Biden's 'retirement security rule' means for advisors

In recent years, few things have stirred as much controversy in the world of wealth management as the "retirement security rule" proposed by the Biden administration.

The way the White House presents it, the proposal is simply a way to expand the fiduciary rule — the legal requirement for wealth managers to serve their clients' best interests — to cover all areas of retirement advice, including rollover guidance and the recommendation of annuities.

But that's not how everyone sees it. Advocates for the insurance industry, which sells annuities, have loudly protested the proposal.

"Rather than explain why the rule is necessary, the president completely mischaracterized the entire insured retirement industry and our products to justify a misguided rule imposing unnecessary and redundant regulatory burdens on investment advice," said Wayne Chopus, president of the Insured Retirement Institute.

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3 ways Biden's 'retirement security rule' could affect financial advisors

Student debt blocks retirement savings

It's been a tough year for people with student debt. Since May 2023, two major lifelines for borrowers have been struck down: first the pause on student loan repayments, which Congress allowed to expire, and then the Biden administration's executive order on forgiveness, which was struck down by the Supreme Court.

For student borrowers, these setbacks put their loans back where they'd been before — in the way of retirement savings. According to a study by the Achieve Center for Consumer Insights, 30% of Americans with student loans have not saved for retirement because of their debts.

"This is increasingly common," said Melissa Cox, a certified financial planner at Fetterman Investments in Dallas, Texas. "We are in a period where families haven't been able to save a lot for … retirement, because they are still paying their own student loans."

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Student debt thwarts Americans saving for retirement

Millennials outpace boomers’ savings, thanks to default features

Much has been written about the wealth gap between baby boomers and millennials, with the younger generation on the losing end. But in the long run, millennials may retire in more comfort than their parents.

That's according to a recent study from Vanguard, which found that for the most part, Americans born in the 1980s and early '90s "enjoy a brighter retirement outlook than boomers."

How is this possible? They often make better investment decisions automatically. That's because over the past two decades, retirement plan features that default employees into higher savings have spread to a growing number of 401(k)s. Boomers, who began their careers at the start of the 401(k) era, missed out on these reforms. But millennials have reaped the benefits without even trying.

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Millennials are on track for better retirement than boomers, Vanguard study finds

Annuity sales keep soaring

So far, total annuity sales this year have reached $270.6 billion, 21% more than in the first nine months of 2022. That year saw the strongest sales in history — $310.6 billion — but experts believe 2023 will soon surpass it.

"I'm more than confident now," said Todd Giesing, director of annuity research at LIMRA, an industry-funded research group. "We're going to see sales that are north of $350 billion this year, significantly higher than what we saw last year."

Annuities, which promise a fixed income stream during retirement, generally sell better during times of economic uncertainty. But over the summer, the boom continued even as the U.S. economy in some ways improved.

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Annuity sales enjoy another 'astronomical' quarter