It’s important to stay updated on retirement laws and regulations. Reading about changes can help you make the most informed decisions about your financial future.
A recent update to the Setting Every Community Up for Retirement Enhancement (SECURE) Act was approved by President Joe Biden in December 2022. The SECURE 2.0 Act contains crucial changes for retirement savers and plans.
What Is the SECURE 2.0 Act?
The SECURE 2.0 Act builds on the initial SECURE Act from 2019, which was passed to help Americans save more for retirement. The 2019 act raised the required minimum distribution (RMD) age and removed the age limit for individual retirement account (IRA) contributions.
SECURE 2.0 addresses additional challenges related to savings and retirement funds. The new changes create more flexibility and accessibility for retirement plans. All the provisions are in full effect as of January 1, 2023.
What Are the New Provisions of the SECURE 2.0 Act?
New additions to the SECURE 2.0 Act include:
- Additional increase in RMD age: The SECURE 2.0 Act increased the RMD age again. Individuals must now begin taking RMDs from IRAs at age 73, a one-year increase from the previous act. You can delay withdrawing your first RMD until April 1 in the following year after your 73rd birthday. The increased age requirement creates more flexibility for retirement savers. The 2.0 Act also states that the RMD age will raise to 75 in 2033.
- Higher catch-up contributions: Catch-up contributions allow participants aged 50 and older to add extra contributions to their retirement plans. The SECURE 2.0 Act increased the accepted contribution amounts for people between the ages of 60 through 63. These individuals can now add up to $10,000 to their retirement savings plan. The Act also states that the contributions will be adjusted for inflation beginning in 2024.
- Automatic 401(k) enrollment plans: The SECURE 2.0 Act makes automatic enrollment in 401(k) plans required for most employers. Before this change, employers had an option for whether or not to make enrollment automatic. Employees that don’t want to participate can still opt out from the program. This change encourages participants to start saving more for retirement.
- Retirement contributions for student loan debts: Beginning in 2024, employers can contribute to workplace savings plans for employees who are paying back student loans. Many younger workers have to choose between paying college debts or allocating money to their retirement savings. The new law lets employers assist with this dilemma and also adds an opportunity to retain workers. In addition, younger employees can begin their retirement savings more quickly.
- Rollovers from 529 accounts to Roth IRAs: The new law lets users with 529 college savings accounts make direct transfers from these funds to their Roth IRAs without any fees or penalties. Previous law versions took penalties and income taxes from these transfers, so individuals can save money under the new act.
Contact SD Mayer Today
In addition to these changes, the SECURE 2.0 Act includes other provisions and alterations from the original version. To learn more about the SECURE 2.0 Act and how it impacts your retirement savings, contact SD Mayer. We are dedicated to solving client business issues, offering actionable insights for future growth. Our team can assist you with:
To get started with SD Mayer, contact us today.
DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
