What's In The Secure Act 2.0 For You?
On December 23, 2022 as part of the Consolidated Appropriations Bill, the SECURE Act 2.0 was passed. Recall the original SECURE Act (Setting Every Community Up for REtirement) was passed in December 2019. SECURE Act 2.0 includes numerous small to medium-sized changes that will impact just about every American. While it's impossible to go over the dozens of changes in detail, let's do a quick run-down of some of the biggest updates (Note: I know this stuff is "dry" but there's a pretty darn good chance there's something in here that impacts YOU so give this a read!):
For investors born between 1951 and 1959, the Required Minimum Distribution (RMD) start date will now be age 73. For those born in 1960 or later, RMDs will not be necessary until age 75. Interestingly, because of the text of the legislation, no one will be required to start distributions in 2023.
The penalty for failing to take a timely RMD will drop from 50% to 25%, and again to 10%, if the mistake is corrected in a timely manner.
Starting in 2024, surviving spouses can now elect to treat the basis for distribution of a former partner's IRA as their own birthday or their former partner's birthday.
Starting in 2025, individuals aged 60 to 63 will be able make an extra $10k/yr catch-up contribution to their workplace retirement plan. Simple IRA plan participants will be able to make an extra $5k/yr contribution. One caveat: If you earned more than $145k the prior year, all catch-up contributions at age 50 or older will need to be made to a Roth account in after-tax dollars.
Starting in 2024, IRA catch-up contribution limits will be indexed to inflation, meaning they could increase every year.
Starting in 2024, defined contribution plans will be able to add an emergency savings account option associated with a Roth account. Contributions will be limited to $2500/yr and the first four withdrawals per calendar year will be tax and penalty-free. Employers must match (to a retirement account) contributions to these savings plans.
Employers will now be allowed to provide employees the option of receiving vested matching contributions to Roth accounts. Previously, employer matches were required to be deposited in pre-tax accounts.
Starting in 2024, there will no longer be RMD requirements for Roth accounts associated with employer retirement plans.
Starting in 2024, employers will be able to offer a matching retirement plan contribution when an employee repays student loans.
Starting in 2024, after 15 years of holding an account, 529 college saving plan account holders may roll up to $35k of account assets into a Roth IRA for the account beneficiary. Note: these rollovers will be treated as a contribution towards the annual Roth IRA contribution limit.
Various provisions enhancing access to retirement plan funds during times of need were added including provisions for public safety workers, victims of qualified disasters, those with a terminal illness, victims of domestic abuse, those in need of long-term care, and other emergencies.
If you have questions as to how these changes may impact you, personally, don't hesitate to reach out.