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What You Need to Know Regarding the Secure Act 2.0

What You Need to Know Regarding the Secure Act 2.0

January 05, 2023

The Secure Act 2.0 was signed into law on December 29, 2022 and includes significant changes regarding retirement accounts. Numerous changes were made, and we will summarize the ones that are most likely to impact your financial pictures below.


´╗┐RMD Age Increases:
The age for Required Minimum Distributions (RMDs) has been increased to age 73 starting in 2023. On January 1, 2033, this age will increase to age 75. This is hugely beneficial to folks who don’t “need” to take money from their retirement accounts as these changes allow the money in your retirement accounts to grow tax-deferred for even longer! Anyone that is already subject to taking RMDs will not be affected by this change and will continue to follow their existing RMD schedule.

Missed RMD Penalty Reduction:
Starting in 2023, the penalty for failing to take an RMD will decrease from 50% to 25% of the RMD amount not taken. However, this penalty is further reduced to 10% if an individual takes a missed RMD from their IRA and submits a corrected tax return in a timely manner.

Higher Catch-up Contributions:
Beginning January 1, 2025, anyone between the ages of 60 to 63 will be able to make up to $10,000 annually in catch-up contributions to their workplace plan. The catch-up contribution amount will also be adjusted for inflation beginning in 2026.

Qualified Charitable Distributions (QCDs):
Beginning in 2023, people who are age 70 ½ and older can elect as part of their QCD limit a one-time gift of up to
$50,000, adjusted annually for inflation, to a charitable gift annuity, charitable remainder unitrust, or a charitable remainder trust. Please note, for gifts to be eligible, they must go directly from your IRA to any of the charitable trusts or entities mentioned above.

Roth Changes:
Unlike Roth IRA’s, RMDs from an employer-sponsored plan (Roth 401K for example) have been subject to RMDs during the owner’s lifetime. Beginning in 2024, Roth assets in an employer plan will be exempt from lifetime RMDs.

529 Plans:
Beginning in 2024, beneficiaries of 529 college plans will be allowed to roll over up to $35,000 over the course of their lifetime into a Roth IRA in their name if the 529 account has been open for at least 15 years. The rollovers will be subject to the annual Roth contribution limits and is treated as a contribution towards the annual Roth IRA contribution limit.

Student Loan Debt:
Beginning in 2024, student loan payments can be treated as retirement plan contributions for the purpose of qualifying for matching contributions from their employer. This means employers will be able to make contributions to their company retirement plan on behalf of employees who are paying student loans instead of saving for retirement. This creates an opportunity for employers to add an incentive to attract and retain key employees burdened with college loans

If you have any questions or would like to know about some of the smaller provisions that were passed as part of the Secure Act 2.0, please do not hesitate to reach out to us! We are here to help.