The SECURE 2.0 Act introduces a series of changes designed to enhance the retirement system and help Americans better prepare for their golden years.
Building on earlier legislation, this new law brings significant updates, especially for those nearing retirement and younger workers managing debt while trying to save.
We like to keep it easy-peasy at Humanic - below is our breakdown of the key changes and what they could mean for you:
1. Required Minimum Distributions (RMDs) Get a Boost
If you're approaching retirement, you'll want to note the new RMD age. Starting in 2023, you can delay taking required minimum distributions from your IRA or 401(k) until age 73.
This age will increase further to 75 in 2033, giving you more flexibility in managing your retirement funds.
Additionally, the penalty for missing an RMD has been reduced, making compliance a little less stressful.
2. Bigger Catch-Up Contributions for Older Workers
For those aged 60 to 63, starting in 2025, you can contribute up to $10,000 annually in catch-up contributions to your workplace plan.
This amount will be adjusted for inflation, allowing you to save even more as you near retirement.
However, starting in 2026, if you earn more than $145,000, catch-up contributions will need to be made to a Roth account, meaning these contributions will be after-tax.
3. Employer Matching Contributions for Roth Accounts
Good news for Roth savers: Employers can now offer matching contributions to Roth accounts.
This means your retirement savings can grow tax-free once contributions are made, providing more flexibility in how you plan for your future!
4. Expanded Options for Charitable Giving
If you're 70½ or older, you can now direct up to $50,000 of your annual qualified charitable distribution (QCD) limit to certain types of trusts or annuities.
This adjustment allows for greater flexibility in how you support the causes that matter most to you!
5. Enhancements to Qualified Longevity Annuity Contracts (QLACs)
For those considering a QLAC as part of their retirement strategy, the premium limit has been increased to $200,000, allowing you to allocate more funds to this type of deferred income annuity.
This change also removes the previous restriction that limited premiums to 25% of your retirement account balance.
6. Automatic Enrollment & Plan Portability
Starting in 2025, new 401(k) and 403(b) plans will automatically enroll eligible employees at a minimum contribution rate of 3%.
Additionally, automatic portability will help employees transfer low-balance retirement accounts when they switch jobs, making it easier to keep saving as you move through your career.
7. New Emergency Savings Options
Beginning in 2024, employers can offer an emergency savings account within defined contribution plans.
These accounts, which function as Roth accounts, allow you to save up to $2,500 annually, with penalty-free withdrawals for emergencies!
This addition encourages saving for the unexpected without compromising your retirement funds.
8. Help for Those with Student Loan Debt
Starting in 2024, employers can "match" your student loan payments by contributing to your retirement account.
This innovative feature helps younger workers continue saving for retirement while paying off their educational loans.
9. Flexibility with 529 Plans
After 15 years, funds in 529 plans can be rolled over into a Roth IRA for the beneficiary, subject to certain limits.
This provides a new way to repurpose unused education savings for retirement.
Need More Information?
The SECURE 2.0 Act offers exciting new opportunities to optimize retirement savings, but every financial situation is unique, and changes often make for worry or concern!
If you have questions about how these changes might affect the way you provide, comply, and navigate retirement offerings to your team, don't hesitate to reach out. We're here to help you keep up-to-date with Secure 2.0 and ensure your financial plans are on track!
Contact us today to discuss your needs how we can assist you in making the most of the SECURE 2.0 Act.
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