SECURE Act 2.0 Highlights

Check out Highlights of enhanced opportunities that Promote Savings for Retirement

We have highlighted key aspects of the new SECURE 2.0 retirement reform legislation that could affect how you plan for your future. The SECURE (Setting Every Community Up for Retirement Enhancement) Act was signed into legislation by the Senate on December 19, 2019, to promote retirement savings. SECURE 2.0 is a bundle of three bills moved through Congress to close gaps in the current legislation. The intent of the new legislation is to allow people to save more money for retirement. The majority of the SECURE 2.0 provisions will become effective in 2024.

While there are too many provisions to illustrate here, including incentives to small businesses and reporting changes for employers, we have highlighted a few features of SECURE 2.0 that might be relevant to you and your family.

Highlights of SECURE 2.0

RMD Age Increase
SECURE 2.0 allows individuals to save longer by increasing the age for required minimum distributions (RMDs). For those who are turning age 72 during 2023 or later, they will start taking RMDs at age 73. For those reaching age 74 after December 31, 2032, their start date is age 75.

Expanded Catch-up Contributions for Employer Sponsored Plans
In 2025, individuals who are 60-63 years old will have an increased catch-up contribution of $10,000 for tax years beginning after 2024 for 401(k), 403(b) and governmental 457(b) plans; and for SIMPLE IRAs and SIMPLE 401(k) plans, the adjusted dollar amount is the greater of $5,000 or an amount equal to 150% of the regular catch-up contribution limit.

For those 50 and over, the catch-up contribution SIMPLE IRAs and other salary deferral plans will be indexed for inflation in the year beginning after Dec. 31, 2025, and the base period will be the calendar quarter beginning July 1, 2024

No RMD requirement for Roth 401K accounts
Currently, Roth 401(k), 403(b) and 457(b) accounts are subject to RMDs (unlike Roth IRAs). Beginning in 2024, SECURE 2.0 Act drops these RMD requirements. Roth 401(k), 403(b) and 457(b) RMDs will be treated in the same way as Roth IRA RMDs – owners won’t be required to take distributions during their lifetime. 

Converting 529 Assets into a Roth IRA
For those who over-fund or no longer need a 529, there is some good news. To prevent balances that aren’t used to cover qualified education expenses from being subject to income tax and the 10% early distribution penalty, SECURE Act 2.0 allows up to $35,000 to be converted from a 529 plan to a Roth IRA.

RMD Penalty Relief
If any individual does not take a required minimum distribution, the penalty is reduced to 25% for taxable years beginning in 2023. This is further reduced to 10% if correction is made within two years after the end of the taxable year in which the distribution was missed.

While SECURE 2.0 provides increased opportunities to save for retirement, everyone’s financial situation is different. As always, consult your financial advisor or tax professional to understand how SECURE 2.0 changes apply to you.  We are also here to guide you and work with your attorney and/or CPA to help you put all the pieces in place.