Secure Act 2.0 and Your Retirement

Secure Act 2.0 and Your Retirement

Secure Act 2.0 and Your Retirement

Three years after the Secure Act introduced major updates to the U.S. retirement system, more modifications are on the way today courtesy of Secure 2.0. Some of the new legislative rules won’t take effect immediately, but there’s a lot to unpack that we’ll be covering in more depth in 2023. 

For now, here are some of the most important takeaways and how you may be affected.

1. Required Minimum Distribution (RMD) Age Increases

The headline grabber: Starting in 2023, the RMD age will increase from 72 to 73, and in 2033 it will rise to 75. Additionally, the penalty for a missed or incorrect RMD will fall from 50% of the amount not withdrawn to 25% (and to as low as 10% if the taxpayer corrects their mistake quickly).

2. Bigger Catch-Up Contributions

Currently, anyone over age 50 can direct an extra $6,500 annually to their 401(k). But per Secure 2.0, anyone age 60 to 63 will be able to sock away $10,000 in catch-up contributions in 2025. What’s more, those catch-up amounts will be adjusted for inflation. 

3. More 401(k) Matching Options

Beginning in 2024, if an employee is making student loan payments, their employer can choose to match those payments with contributions to the individual’s 401(k). 

4. Added 529 Flexibility

Secure 2.0 creates an additional off-ramp for unused 529 money. The bill permits a rollover to a Roth IRA from a 529 if certain conditions are met. It appears that $35,000 will be the lifetime limit for rollovers and the 529 must be established for at least 15 years to qualify. Finally, beneficiaries of the 529 must move the money over to their own Roth IRA. 

We’ll be providing additional detail on these and other retirement saving provisions as we move into the new year.

Tax and legal information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice.  Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice. Always consult a licensed attorney or tax professional regarding your specific legal or tax situation.

Our statements and opinions are subject to change without notice.  All investments carry risk of loss and there is no guarantee that investment objectives will be achieved.

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