9 Ways the Secure Act 2.0 Can Impact Your Retirement, #133

Retire With Ryan

At the end of 2022, Congress passed The Secure Act 2.0. Originally ratified in 2019, this new version introduces even more changes to the ways Americans save for retirement. On this episode, I'm going to cover nine ways The New Secure Act 2.0 will impact current and future retirees.

You will want to hear this episode if you are interested in...

• Changes to required minimum distributions [1:48]
• Higher catch-up contributions in 2025 [3:42]
• Receiving vested matching contributions to Roth accounts from employers [4:44]
• Making qualified charitable distributions [5:34]
• Introducing qualified longevity annuities [6:45]
• Automatic 401k and 403b enrollment and plan portability [7:49]
• Contributing to a retirement emergency fund [8:46]
• Saving for retirement by paying off student loans [9:32]
• Rolling over a 529 Plan to a Roth IRA [9:57]

Change is coming

The Secure Act stands for “Setting Every Community Up for Retirement Enhancement” and is designed to provide more accessibility and flexibility when saving for retirement. The Secure Act 2.0 changes several things about its predecessor while introducing new tools for the retirement savings toolbelt. One of those changes is starting January 1st of 2025, individuals 60-63 years old can make catch-up contributions to a workplace retirement plan up to $10,000 annually. Also, the $1,000 catch-up contribution limit for people 50 and older will be indexed for inflation starting in 2024. This means the amount could rise every year based on federally determined cost of living increases.

Another provision made by The Secure Act 2.0 allows defined contribution retirement plans to add a designated Roth account as an emergency savings account. These accounts would be eligible to accept participant contributions from non-highly compensated employees starting in 2024. The contributions would be limited to $2,500 annually or a lower amount set by the employer. The first four withdrawals in a year are tax and penalty-free, and depending on your plan’s rules, contributions may be eligible for an employer match. This gives you the ability to set up an invested emergency fund that grows tax-free and allows you to pay for both short-term and unexpected expenses.

How The Secure Act 2.0 impacts required minimum distributions

Required minimum distribution (RMD) changes are another big part of The Secure Act 2.0. As you may know, RMDs refer to the age at which you have to start taking money out of your retirement accounts. The original Secure Act increased that age from 70 to 72. Thanks to 2.0, that age increased to 73 starting January 1st of this year, and individuals turning 72 in 2023 will be able to delay their RMD until the following year. Additionally, the RMD age raises to 75 in 2033.

Prior to the passing of The Secure Act 2.0, there was a steep 50% penalty on late or insufficient RMD withdrawals. Starting in 2023, that penalty drops to only 25%, and further decreases to 10% for an IRA owner that fails to withdraw their RMD but corrects it in a timely manner. Additionally, Roth IRA accounts and employer-sponsored retirement plans will be exempt from required minimum distributions beginning in 2024. Listen to this episode to hear all the ways The Secure Act 2.0 could affect your retirement savings!

Resources Mentioned

• Changes To Required Minimum Distributions For 2020, #3

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