Summarizing the SECURE Act 2.0

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In late December, Congress passed the SECURE Act 2.0 as a part of the wider Consolidated Appropriations Act. The passing of SECURE 2.0 came almost three years to the date after the passage of its predecessor, the SECURE ACT. And like its predecessor, this new Act changes a variety of provisions across the retirement landscape – almost 100 changes in total!

Listed below are the top handful of changes from the SECURE Act 2.0 we believe will impact the most individuals and families. (Keep in mind, of course, that this law is brand new and there almost certainly will be clarifications and possible revisions necessary by the IRS as the law is implemented.)

  1. Required Minimum Distribution (RMD) Age immediately changes to 73. In 2033, this will increase again to 75. Anyone born in 1951 to 1959 now has an RMD age of 73; if you planned on starting RMDs this year due to turning age 72, this is no longer a requirement. Your RMD will start in 2024. Anyone born in 1960 and after has an RMD age of 75.
  2. Employers are immediately able to offer their employees Roth matching and Roth non-elective retirement contributions, while profit-sharing contributions must remain pre-tax funds. Employers should still be able to deduct Roth contributions made to employees’ 401(k)s and 403(b)s. The amount of an employer’s Roth contribution will be included as taxable income to the employee.
  3. Effective 2024, if an employee’s wages are greater than $145,000, the catch-up 401(k) or 403(b) contribution must be made with Roth dollars. Currently, if you are over age 50, you can contribute an additional $7,500 to your 401(k) or 403(b). Currently, you can choose to contribute pre-tax dollars or Roth dollars (if allowed by your plan). Beginning in 2024, if your income is over the $145,000 threshold, employees must contribute Roth dollars.
  4. Effective in 2025, the catch-up contributions will be increasing for individuals ages 60, 61, 62, and 63 only. The catch-up for those ages will be the greater of $10,000 or the amount equal to 150% of that year’s catch-up contribution.
  5. Qualified Charitable Distributions (QCDs) will be indexed for inflation beginning in 2024. The current maximum QCD amount is $100,000 per year per taxpayer.
  6. Effective beginning in 2024, a total of $35,000 can be transferred from a 529 plan to Roth IRA for the beneficiary. The 529 plan must have existed for at least 15 years,  and any contributions/earnings in the past 5 years are not eligible to be transferred. The beneficiary of the 529 and the Roth IRA must be the same person and must have earned income. The amount eligible to be moved into the Roth IRA is subject to the annual contribution limit (currently $6,500). $35,000 is the lifetime maximum that can be moved from a 529 into a Roth IRA for that specific beneficiary.
  7. And lastly, some key updates to the Military Spouse Eligibility Credit. Congress has finally acknowledged that the spouses of military members are often required to move regularly and, as a result, not able to fully vest in employer-sponsored retirement plans. Moving forward, employers with less than 100 employees can receive a tax credit for allowing participation in the retirement plan after 2 months of employment and immediately vest all employer contributions.

If you have questions about any of these changes – or any of the changes that make up the SECURE Act 2.0, get in touch with our team!

And if you’re interested in learning more about how our Fee-Only approach can help you reach your financial goals, get in touch with our team


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