SECURE 2.0 Act: A New Era for Retirement Savings
The SECURE 2.0 Act brought meaningful changes to retirement savings for millions of Americans. Many of the provisions phase in over several years. Congress signed the Setting Every Community Up for Retirement Enhancement 2.0 Act (SECURE 2.0) into law on December 29, 2022. Building on the original SECURE Act of 2019, this bill made major changes to required minimum distribution (RMD) rules and other retirement provisions.
Here are some of the significant retirement plan changes and when they’ll become effective:
SECURE 2.0 Act Changes to Required Minimum Distributions
The age for beginning RMDs is going up.
The Act raises the age at which owners of employer-sponsored qualified plans, IRAs, and individual annuities must begin taking distributions. Under the new law, the required beginning date moves from age 72 to age 73 starting January 1, 2023. These ages will rise again to age 75 starting January 1, 2033.
Higher “Catch-up” Contributions for 401(k) Participants Under SECURE 2.0.
Currently, participants in certain retirement plans can make additional catch-up contributions if they’re age 50 or older. The limit on catch-up contributions to 401(k) plans is $7,500 for 2023. SECURE 2.0 will increase the 401(k) plan catch-up contribution limits for individuals ages 60 through 63. These limits raise amounts to the greater of $10,000 or 150% of the regular catch-up amount. After 2025, the IRS will index the increased amounts for inflation. This provision will take effect for taxable years beginning after December 31, 2024. Additionally, the SECURE 2.0 Act increases catch-up amounts for SIMPLE plans.
SECURE 2.0 Act: Tax-Free 529 Rollovers to Roth IRAs.
SECURE 2.0 will permit beneficiaries of 529 accounts to make direct trustee-to-trustee rollovers to their Roth IRAs, without tax or penalty. Several rules apply. This provision is effective for distributions after December 31, 2023.
Retirement Savings Matching for Student Loan Borrowers.
The new law allows employers to make matching contributions to 401(k) and certain other retirement plans with respect to “qualified student loan payments.” Ultimately, the result of this provision is that employees who can’t afford to save money for retirement because they’re repaying student loan debt can still receive matching contributions from their employers into retirement plans. This will take effect beginning after December 31, 2023.
SECURE 2.0 Expands ABLE Account Eligibility
The SECURE 2.0 Act also changes certain provisions unrelated to retirement plans, including an update to Achieving a Better Life Experience (ABLE) accounts. Relatedly, states establish tax-exempt ABLE programs to assist individuals with disabilities. Previously, the law required that an individual’s disability or blindness must have occurred before age 26 to qualify as a beneficiary of an ABLE account. However, the SECURE 2.0 Act raises this age limit to 46, making more people eligible to benefit from an ABLE account. This provision takes effect for tax years beginning after December 31, 2025.
Talk to RYBD About Your SECURE 2.0 Retirement Savings Strategy
These are only some of the many provisions in SECURE 2.0. RYBD’s team of expert tax professionals, CPAs, and Advisors are standing by to help you make sure you are on the right retirement path, and taking every advantage available to you. Contact us if you have any questions about your situation.
