As Democrats Take Over Senate, Personal Finance Hangs in Balance

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Another round of stimulus payments

At the end of last year, the House passed a bill to increase stimulus payments to $2,000, up from $600 per adult and per child for individuals with adjusted gross incomes under $75,000. Ultimately, the push for bigger checks faced opposition in the Republican-controlled Senate, and the legislation ran out of time. As of Jan. 7, the Internal Revenue Service had sent out about $129 billion in $600 payments.

The change in control of the Senate means a new calculus will come to bear. On Wednesday, Sen. Chuck Schumer, poised to be the new majority leader in the Senate, said one of the first moves the Democrats will make is to authorize the $2,000 payments.

If Congress authorizes stimulus payments of $2,000 per adult and dependent, many upper-income households who haven’t received money in the previous two rounds of payments could get partial payments because of the details of the calculations that shrink the payments as incomes rise.

An extension of Cares Act provisions

If economic data indicate a need for another broad relief package, lawmakers might extend for 2021 expired provisions of the Cares Act, which was signed into law on March 27. These could include penalty-free withdrawals of as much as $100,000 from retirement accounts for people whose finances have been negatively affected by Covid-19 and a suspension of required minimum distributions from retirement accounts for older Americans. Congress suspended required distributions in 2020 to give nest eggs time to recover from market declines at the beginning of the pandemic.

With the stock market now up, the argument for RMD relief isn’t as strong as it was in March, said Shai Akabas, director of economic policy at the Bipartisan Policy Center in Washington.

A broad retirement bill

A bipartisan proposal that contains a broad mix of measures to encourage retirement savings is likely to pass in the next two years, said Paul Richman, chief government and political affairs officer at the Insured Retirement Institute, which supports the bill. Given the Democrats’ narrow margin, the proposal is unlikely to change significantly but could move quickly through Congress.

Among other things, the measure would increase the age at which savers must start taking withdrawals from 401(k)s and IRAs to 75, from 72, waive required distributions entirely for people who have cumulative retirement account balances of $100,000 or less, and permit employers to use 401(k) matching contributions to help employees repay student-loan debt.

Student-loan forgiveness

Mr. Biden has said he wants to forgive a substantial portion of the $1.5 trillion Americans owe in federal student debt. His proposal includes forgiving $10,000 in debt for every American with federal student loans.

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