The “Setting Every Community Up for Retirement Enhancement” (SECURE) Act of 2019 began the process of helping Americans save for retirement – and this year, the SECURE 2.0 Act takes effect.
Like the original legislation, SECURE 2.0 had broad bipartisan support, and was ultimately passed in the congressional appropriations bill at the end of 2022. Like its predecessor, the SECURE 2.0 Act offers changes that could help you save more for retirement, wait longer to take distributions, and uncover some tax-smart strategies.
Here are a few of the key passages that could affect you:
For 2023:
- RMDs: The age to begin taking Required Minimum Distributions will increase from 72 to 73 in 2023 (for people who reach age 72 after Dec. 31, 2022). The penalty for failing to take RMDs will decrease from 50% to 25% of the RMD amount, and 10% if corrected in a timely manner for IRAs.
- QCDs: The reach of Qualified Charitable Distributions will expand: People who are age 70½ and older can use part of their QCD as a one-time gift of up to $50,000 to a charitable remainder unitrust, a charitable remainder annuity trust, or a charitable gift annuity. (No changes were made to the 70½ rule that allows you to make QCDs from your IRA, even if you are not yet required to take an RMD.)
For 2024:
- Workplace plans: Defined contribution retirement plans, such as 401(k)s, will be able to add an emergency savings account.
- Employers will be allowed to make matching contributions to an employee’s 401(k) per their plan provisions when an employee makes a student loan repayment, thus enabling the employee to pay off the student loan and save for retirement at the same time.
- RMDs will no longer be required from Roth accounts in employer retirement plans.
- 529 plans: After 15 years, you’ll be able to roll unused 529 plan assets over to a Roth IRA for the beneficiary, subject to annual IRA contribution limits and an aggregate lifetime limit of $35,000.
For 2025:
- Catch-up contributions will increase for employer plans, for account holders ages 60-63.
- Automatic enrollment for new 401(k) or 403(b) plans will begin.
- “Retirement savings lost and found” database will enable retirement savers, who might have lost track of their pension or 401(k) plan, to search for the contact information of their plan administrator.
With dozens of other provisions as well, SECURE 2.0 may provide you with some key strategies for tax-smart retirement planning. Be sure to talk to Ken Barnes at (317) 806-2089 or kbarnes@edelmanfinancialengines.com about how SECURE 2.0 may benefit you.
This information is from Edelman Financial Engines dated 1/10/23.