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  •  The SECURE Act 2.0 – What You Should Know 

     

    What is the SECURE Act 2.0?

    Congress officially passed the SECURE Act 2.0 at the end of 2022 as part of a $1.7 trillion omnibus spending package. The bill builds on changes that were enacted in the original Secure Act of 2019. These changes are expected to have major impacts to Americans and their ability to save more and save sooner for retirement. 

    There are seven sections to this new bill, each covering various topics around retirement such as contributions, withdrawals, plan enrollment, and retirement plan rule changes.  Below are some of the highlighted topics that you should consider.


    RMD (Required Minimum Distribution) Changes:

    • Starting age to take the RMD for Retirees
      • Age 73 for an individual who attains age 72 after December 31, 2022 and age 73 before January 1, 2033.
      • Age 75 for an individual who attains age 74 after December 31, 2032.

     

    • Missed RMD Penalty
      • Decreases the penalty from 50% to 25% of the shortfall.
      • If the error is corrected in a timely manner, the penalty will be reduced to 10%.

     

    • Eliminates RMDs for Roth accounts in qualified employer plans (effective 2024)
      • Previously Employer plan Roth accounts were subject to the regular RMD rules, making them subject to RMDs beginning at age 73.
      • Starting in 2024, the change will make RMD rules consistent with Roth IRA accounts.

     

    • Post Death Option for RMDs
      • In 2024 and beyond, a surviving spouse will now have the option to be treated as the deceased spouse for RMD requirements going forward.
      • This could be impactful if the inheriting spouse is older than the deceased, allowing for more favorable distribution requirements based on the deceased’s younger age. Therefore, if the decedent was younger than the surviving spouse, the spouse can wait to take the RMD.

     

    Catch-up Contributions:

    • Increased Catch-up
      • Current catch-up contributions for anyone 50 and older are limited to $7,500.
      • Starting in 2025, SECURE Act 2.0 will allow for certain individuals to make larger catch-up contributions to their retirement plans.
      • In 2025 and later, individuals ages 60–63 will be able to make a catch-up contribution as high as $10,000.
      • Creates an income limit of $145,000 for anyone over age 50 making catch-up contributions.
        • Must be made to a Roth account using after-tax dollars.

     

    Limited 529 to Roth IRA Transfers:

    • Beginning in 2024, some individuals will have the opportunity to move 529 plan money directly into a Roth IRA.

     

    Relaxation of 72(t) Rules:

    • Challenges when using Substantially Equal Periodic Payments (SEPPs) or 72(t) distribution for withdrawals prior to age 59½ is the inflexibility of the program once started.
    • Starting in 2024, SECURE Act 2.0 will allow for partial transfers or rollovers from accounts where 72(t) has already started, if the withdrawals under the program remain consistent.

     

    Other:

    • Waiver of premature penalty for transfers into long-term care policies.

     

    This is a modified list of the topics that the SECURE Act 2.0 covers. To review the entire bill, visit https://www.finance.senate.gov/download/retirement-section-by-section-


    If you want to know more or have questions about how the changes might enhance your individual retirement planning, reach out to Ginger Thompson at NJASA to schedule a call with Carmine Anzalone.