Secure Act 2.0 has officially become a law. The Act has some serious consequences for retirement accounts. Below are some key takeaways:

  1. Change in RMD Age: The Secure Act of 2019 previously changed the required minimum distribution age from 70 ½ to 72. Secure Act 2.0 changes the age again from 72 to 73 starting in 2023, and then again to 75 starting in 2025. If you turned 72 in 2022 or earlier, you need to keep taking your annual RMD’s.
  2. Change in RMD Penalty: Previously, if you failed to take your RMD for the year, you were charged a 50% penalty on the shortfall. The Act has changed the penalty to 25% beginning in 2023.
  3. Higher Catch-Up Contributions for Employer Sponsored Plans: Beginning in 2025, individuals aged 60-63 will be able to contribute an extra $10,000 (indexed for inflation) to their employer sponsored plan. For 2023, those who are age 50 or above can make a $7,500 catch up contribution to their employer sponsored plan.
  4. Matching Allowed to Employer Sponsored ROTH Accounts: Previously, employers could only provide a matching program based on pre-tax contributions from an employee. Under the Act, employers can now match after-tax contributions. Your employer will need time before this benefit is in place.
  5. Matching Student Loan Debt Payments: Beginning in 2024, employers can match an employee’s student loan payment and place the contribution into the employee’s retirement account, on top of their retirement matching contribution.
  6. 529 Plans: Assets held in a 529 plan can be rolled over to a ROTH IRA for the beneficiary of the 529. The assets will be subject to annual ROTH IRA contributions and a lifetime amount of $35,000.
  7. Emergency Savings within Employer Defined Contribution Plans: Employers can add a designated ROTH account for eligible non highly compensated employees starting in 2024. Contributions could be a maximum of $2,500 annually and the first 4 withdrawals in a year can be taken tax and penalty free.
  8. Change in Retirement Savings Credit: Previously, taxpayer’s in a low tax bracket could receive a tax credit up to $2,000 for saving for retirement. The Act will now change from a tax credit to a direct government contribution to your IRA account.
  9. Lost and Found Database: For those who have been a part of several retirement plans, the Department of Labor is creating a database to help track down “lost” retirement benefits for taxpayers.
  10. Small Business Credit: For a business with fewer than 50 employees, a tax credit will be available to cover the costs of establishing retirement plans, making it easier and more cost effective to offer retirement benefits to their employees.

There are many more provisions of the Secure Act 2.0 to aid taxpayers in saving for retirement. While saving for retirement may seem a daunting task, our advisors are here to help navigate the complexities of your unique tax situation.