Secure Act 2.0: What You Need to Know

Kari Wolfson, CFP^®, AWMA^®

Partner, Wealth Advisor

The House passed their draft of “Securing a Strong Retirement Act,” AKA the Secure Act 2.0, in late March. Now the Senate side is polishing their own version of the bill, and all indications point to it ultimately being signed into law. The exact provisions are a little less certain at this point, but we’re keeping an eye on three R’s.

RMDs. The 2019 SECURE Act raised the required minimum distribution (RMD)A required minimum distribution is the amount of money that must be withdrawn each year from tax-deferred retirement accounts once the beneficiary reaches retirement age (72, according to IRS rules). age from 70.5 to 72. The new bill seems likely to edge that age up even further—this time from 72 to 75 over the next ten years. It may also eliminate RMDs for individuals with less than $100,000 in retirement savings and reduce the penalty for failing to take RMDs from 50% to 25%.

Roth IRAs. Simply put, Secure 2.0 paves the way for more Roth contributions. The proposed legislation could allow Roth-style (after tax) contributions to SIMPLE and SEP IRAs; and give 401(k) participants the option of having employer-matching funds directed into Roth 401(k) accounts. It could also roll-out additional catch-up contributions (for workers age 50 or older) into qualified workplace retirement plans—and they would come after-tax into a Roth 401(k).

Roths are a handy option for retirement savers—and in this case they are also good for the government.  After all, taxes are paid upfront with Roths, so the IRS gets more money sooner.

Retirement Saving. Encouraging individuals and employers to do more to boost retirement readiness is the crux of this bill, of course, and there’s a lot on the table. Among other things, it could expand automatic enrollment and auto-escalation (stepped deferrals) in workplace retirement plans, helping to increase participation and contribution rates for eligible employees. And it may also increase tax incentives for small businesses to set up workplace retirement plans.

Other provisions could include employer matching for student loan payments and enhancements to the rules around Qualified Charitable Distributions (QCDs). We will have much more to say about this legislation when it passes. Until then, call us if you have any questions or we can help you think through retirement planning.

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.