The SECURE 2.0 Act has introduced over 90 provisions that impact various retirement savings plans in the United States.
Why it matters: Understanding these changes is crucial for individuals to prepare for their financial future and make informed decisions about their retirement savings.
The details: Some key modifications include:
- Raising the age for Required Minimum Distributions (RMDs) from 72 to 73 in 2023, and eventually to 75
- Postponing final rules for inherited IRAs until 2025 and reducing penalties for missed RMDs
- Eliminating RMDs for Roth 401(k) accounts starting in 2024
- Allowing emergency withdrawals up to $1,000 from retirement accounts without penalty from 2024
The act also mandates automatic enrollment in 401(k) and 403(b) plans starting in 2025, which has been shown to increase participation.
What they’re saying: Experts weigh in on the implications of these changes:
- “Most older adults can’t afford to wait until 72, let alone until age 75,” noted Paul Camhi from The Wealth Alliance, regarding the delay in RMD age.
- The U.S. Department of Labor states, “Whether you already have a plan or are considering starting one, automatic enrollment plans offer many advantages.”
Other notable provisions include increased catch-up contribution limits for individuals aged 60-63 starting in 2025, employer matching contributions for student loan payments from 2024, and limited rollovers from 529 plans to Roth IRAs beginning in 2024.
The bottom line: The SECURE 2.0 Act brings significant changes to retirement savings rules, requiring careful planning and understanding to navigate the new landscape effectively.
Full story
Congress passed the SECURE 2.0 Act, which changes retirement savings rules in the United States. The act has over 90 provisions that impact various retirement plans. Some changes are already in effect, while others will roll out until 2027.
One key change is the age for Required Minimum Distributions (RMDs). It increased from 72 to 73 in 2023 and will eventually rise to 75. This gives retirees more flexibility but may pose challenges for those who rely on RMDs for living expenses.
The act also postponed final rules for inherited IRAs until 2025. Penalties for missed RMDs from 2020 to 2023 are waived, and the penalty for missing an RMD has been reduced. Starting in 2024, RMDs will no longer be required for Roth 401(k) accounts, aligning them with Roth IRAs.
Secure 2.0 Act updates
This necessitates careful planning to understand the impact on retirement strategies. Employers can now offer small financial incentives to encourage employee participation in retirement plans.
The act also permits early “emergency” withdrawals up to $1,000 without the usual 10% penalty. Automatic enrollment in 401(k) and 403(b) plans will be mandated starting in 2025. The U.S. Department of Labor states, “Whether you already have a plan or are considering starting one, automatic enrollment plans offer many advantages.”
Catch-up contribution limits will increase from 2025 for those aged 60-63.
High earners aged 50 or over must make catch-up contributions on a Roth basis starting in 2026. Employers can make matching contributions to an employee’s retirement account based on the employee’s student loan payments from 2024. This helps those with significant student loan debt save for retirement.
The act allows for limited rollovers from 529 plans to Roth IRAs beginning in 2024, subject to various requirements and limitations.
- LaGradaOnline.”Changes To Retirement Savings Rules in the United States – What You Need to Know Before 2025″.
- Investors.”Congress Is Coming After Your Inherited IRA — What To Do”.
- LaGradaOnline.”Required Minimum Distributions (RMDs) Changes – 4 Important Things Retirees Should Know”.