By Kevin Duffy, Manager
On December 29, 2022, President Biden signed into law the SECURE 2.0 Act, which reforms many provisions of the retirement system. While the Act is composed of nearly 400 pages, here are a few important takeaways that could impact you, whether you are currently in retirement, maximizing your current retirement contributions, or even planning to jumpstart your child’s retirement account.
For current retirees:
Required Minimum Distributions (RMDs)
Previously, owners of retirement accounts were required to start taking RMDs at age 72. In 2023, this minimum age has been pushed to 73, and in 2033, the minimum age will increase to 75.
Penalties for failure to take RMDs have been reduced from 50% to 25% and are further reduced to only 10% if the error is corrected in a timely manner.
Roth accounts, which were previously subject to RMD requirements, will be exempt beginning in 2024.
In-plan annuity payments will no longer result in inflated RMDs.
Qualified Charitable Distributions (QCDs)
Individuals aged 70 ½ and up may elect a one-time gift of up to $50,000 to a qualified charity. Beginning in 2023, the list of qualified charities has been expanded to include a charitable remainder unitrust, a charitable remainder annuity trust, and a charitable gift annuity.
Retirement planning:
Catch-up Contributions
Beginning in 2025, catch-up contributions to a workplace plan for individuals aged 60 to 63 will be increased to $10,000 (currently $7,500), indexed to inflation in subsequent years.
Beginning in 2024, the $1,000 IRA catch-up contribution limit will be indexed to inflation as well.
Roth Accounts
Employers will be permitted to make vested matching contributions to Roth accounts beginning in 2023.
Automatic enrollment
Starting in 2025, businesses adopting new 401(k) and 403(b) plans are required to automatically enroll eligible employees with a contribution rate of 3%.
Emergency Savings Accounts
Beginning in 2024, defined contribution retirement plans will be able to add an additional designated Roth account which can receive contributions of up to $2,500 per year. The first four withdrawals from this account each year will be tax and penalty-free.
Student Loan Debt “Matching” Contributions
Also beginning in 2024, employers will be permitted to make payments to a retirement account matching the amount of student loan debt payments made by the employee.
529 Plan Rollover
529 plans will be eligible to be rolled over into a Roth IRA subject to an aggregate lifetime limit of $35,000.
If you need help navigating the impacts of SECURE 2.0, contact us for a free consultation.