Secure Act 2.0

Friday, January 20, 2023

The SECURE 2.0 Act of 2022 (“SECURE 2.0”) is chock-full of provisions – 92, in fact – aimed at improving Americans’ preparedness for retirement. Like SECURE Act 1.0 (passed December 2019), this latest round of legislation provides workers with greater access to retirement plans and further encourages retirement savings. Here are some highlights from the newly passed bill:

Raising the Required Minimum Distribution (RMD) age: The bill raises the age for RMDs to 73 and increases to age 75 in 2033.

Roth 401(k) plans: Starting in 2024, these plans will no longer be subject to RMDs. Note that Roth IRAs were already exempt.

Penalty reduced: The penalty for missing your RMD deadline is currently 50% of your RMD; that penalty amount is now reduced to 25%. If you correct your error in a timely fashion, that penalty will drop to 10%.

Catch-up Contributions: 401(k) & 403(b) plans: starting in 2025, the catch-up contribution will be the greater of $10,000 or 150% of the catch-up limit for individuals between ages 60 to 63. Starting in 2026, the catch-up will be indexed by inflation. For IRAs, the $1,000 catch-up limit will be indexed for inflation for tax years beginning in 2024.

Rollovers from 529 Plans to Roths: Individuals can make tax- and penalty-free rollovers from 529 plans to Roth IRAs, but with certain limitations. The aggregate lifetime rollover limit is $35,000, and beneficiaries must move funds between a 529 plan and Roth IRA in their name. The 529 account must have been opened for more than 15 years. Provisions are also subject to other rules, so consult with your wealth advisor on this strategy.

Qualified Charitable Distribution (QCD) Increased: The current $100,000 QCD amount will be indexed for inflation going forward. Note you have to be age 70½ to make a QCD to a qualified charity. You can now also make a one-time gift of up to $50,000 indexed for inflation through a charitable remainder unitrust, a charitable remainder annuity trust, or a charitable gift annuity.

As always, please reach out with any questions and we will do our best to address them.



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