legislation & rules

The SECURE Act 2.0 will affect a large percentage of Americans. Below are some of the highlights of the legislation along with a link to the legislation itself.

For Retirement Age U.S. Residents

Required Minimum Distributions (RMD)

• Beginning this year, the Required Minimum Distribution age increases to 73. An individual who turns 74 after 12/31/2032 the age becomes 75. The actuarial tables have not changed, so individuals choosing to wait to take distributions will have a higher RMD than if they had started at an earlier age.

• Beginning this year, the penalty for failing to take an IRA RMD will decrease to 25% of the RMD amount from the current 50%. It will reduce further to 10%, if it is corrected in a timely manner.

• Beginning this year an individual 70 ½ or older can make a one-time distribution of up to $50,000 to establish a new charitable remainder annuity trust, charitable remainder unitrust, or charitable gift annuity. These funds count towards applicable RMD’s.

For Non-Retirement Age U.S. Residents

Changes to 401(K) and 403(B) Accounts

• Beginning 1/1/2025 there will be an automatic enrollment for new 401(k)/403(b) policies in companies with 11 or more employees. There is a minimum contribution of 3%-10% the first year unless the employee specifically opts out. At the end of the first year the contribution amount will automatically increase each subsequent year by at least 1% until a 10% contribution is reached, but not more than 15%.

• Beginning 1/1/2025 there will be a $10,000 catch up for individuals that turn 60, 61, 62, or 63 in that year. (This amount will be indexed to inflation.)

New Allowances for Penalty Free Withdrawals Beginning 12/31/2023

• A withdrawal of up to $22,000 for qualified disaster recovery can be made.

• Unlimited withdrawals if an individual is diagnosed with a terminal illness (Someone who can reasonably be assumed to pass in the next 84 months.)

• Domestic abuse victims can withdraw up to $10,000.

Other Significant Updates

• In 2024 IRA catch up contributions for individuals over 50 will index for inflation. The current cap is $1,000.
   
• In 2024 employers with defined contribution plans can add an emergency savings account that is ROTH eligible for non-highly compensated employees. Contributions are limited to $2,500 or less as set by the employer. The first four annual withdrawals can be made penalty free, and contributions may be eligible for an employer match.
   
• Beginning in 2024 employers can “match” employee’s student loan payments as contributions to their retirement accounts.
   
• 529 plans can now be rolled over into the beneficiary’s ROTH IRA. Accounts become eligible after 15 years with a limit of $35,000. The rollover will count towards the beneficiary’s annual ROTH IRA limit.

*The above is information only and should not be construed as legal or financial advice. Please consult your professional counsel.

Want to read the full legislation?

Visit The SECURE 2.0 Act of 2002