What’s in the SECURE 2.0 Act?
Who doesn’t enjoy tying up year-end loose ends? The original SECURE Act was signed into law on December 20th 2019. Its “sequel,” the SECURE 2.0 Act, was similarly enacted at year-end on December 29th 2022.
Both pieces of legislation seek to reform how Americans prepare for retirement while juggling current spending needs. How, when, or will each of us retire? How can government incentives, regulations, and safety nets help more people safely do so—or at least not get in the way?
These are questions we’ve been asking as a nation for decades, across shifting socioeconomic climates. Throughout, a hard truth remains:
Employers and the government play a role in helping you save for and spend in retirement, but much of the preparation ultimately falls on you.
That’s America for you. The good news is, you get to call your own shots. The bad news is, you have to. Neither the original SECURE Act nor SECURE 2.0 has fundamentally changed this reality. SECURE 2.0 has, however, added far more motivational carrots than punishing sticks. Its guiding goal is right there in the name: Setting Every Community Up for Retirement Enhancement (SECURE). Following is an overview of its key components.
Note: Implementation for each SECURE 2.0 provision varies from being effective immediately, to ramping up in future years. Many of its newest programs won’t effectively roll out until 2024 or later, giving us time to plan. We’ve noted with each provision when it’s slated to take effect.
Below are a few provisions that may have an impact on your future financial planning:
- Required Minimum Distributions (RMDs) pushed back in 2023 (Age 73 if born between 1951-1959, Age 75 if born in 1960 or after)
- Elimination of RMDs for Roth accounts within employer-sponsored plans in 2024
- Employers may deposit matching or profit-sharing contributions to Roth accounts, which would be taxable to employee in year of contribution in 2023
- High wage earners (wages in excess of $145,000 in previous calendar year) will be required to use Roth account for catch-up contributions in employer-sponsored plans, which would be taxable to employee in year of contribution (beginning 2024)
- 529-to-Roth IRA transfers – may be able to move unused 529 plan money into Roth IRA –subject to numerous restrictions and limits in 2024
- Post-death option for surviving spouse beneficiary to delay RMDs until when deceased spouse would have reached RMD age – only applies if younger spouse pre-deceases older spouse in 2024
- IRA catch-up contribution limit ($1,000) indexed for inflation starting in 2024
- Increased employer-plan catch-up contributions when in 60’s – catch-up contribution limits will be higher (at least $10,000 and inflation adjusted) for those ages 60, 61, 62, and 63, starting in 2025
- New QCD rules which start in 2024 include:
- Maximum annual amount of $100,000 indexed to inflation
- One-time $50,000 QCD allowed to charitable trust/charitable gift annuity
How else can we help you incorporate SECURE 2.0 Act updates into your personal financial plans? The landscape is filled with rabbit holes down which we did not venture in this article, with caveats and conditions to be explored. And there are a few provisions we didn’t touch on here. As such, before you proceed, we hope you’ll consult with us or others (such as your accountant or estate planning attorney) to discuss the details specific to you.
Come what may in the years ahead, we look forward to serving as your guide through the ever-evolving field of retirement planning. Please don’t hesitate to reach out to us today with your questions and comments.