SECURE Act 2.0: What You Need to Know

January 04, 2023
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Here is an update on some significant changes designed to help Americans save more for retirement. You may have heard of the SECURE Act 2.0, which Congress passed as part of a larger federal spending bill last week.1 This legislation builds upon the 2019 Setting Every Community Up for Retirement Enhancement Act and includes several provisions that may be beneficial to savers and investors. Here are some of the key points to be aware of:

  • Required Minimum Distributions (RMDs) can be delayed until age 73, allowing investors to hold onto their retirement account investments for longer. Moreover, the new rule suggests that starting in 2033, RMDs must begin at age 75.
  • Older workers (age 60+) with employer-sponsored retirement plans will be able to make "catch-up" contributions of up to $10,000 per year, helping them to build up their retirement savings.
  • 529 education savings plans have become more flexible, allowing up to $35,000 of funds to be rolled into a Roth IRA without penalty, providing more choices for education funding. Roth IRA distributions must meet a five-year holding requirement and occur after age 59½ to qualify for the tax-free and penalty-free withdrawal of earnings. Tax-free and penalty-free withdrawals are allowed under certain other circumstances, such as the owner's death. The original Roth IRA owner is not required to take minimum annual withdrawals.
  • Small businesses with fewer than 50 employees will be eligible for credits to cover the costs of establishing retirement plans, making it easier for them to offer retirement benefits to their employees.
  • Employers can now make matching contributions to employees' student loan repayments, helping employees to pay off their debt faster.
  • Retirement plan participants can make penalty-free withdrawals of up to $1,000 for emergencies or up to $22,000 for natural disasters, providing financial support in times of need.
  • The Department of Labor will create a searchable database to help individuals locate any "lost" retirement benefits from previous employers, making tracking and accessing all retirement savings easier.

While the SECURE Act 2.0 may not solve the broader issue of inadequate retirement savings for all Americans, it's still a significant development that could benefit savvy savers and investors. We're here to help you understand how these changes may impact your financial strategy, so don't hesitate to reach out to us if you have any questions or want to discuss these updates further.



1 Forbes.com, Jan 3, 2023