Broker Check
Understanding the SECURE Act 2.0

Understanding the SECURE Act 2.0

January 06, 2023
Share |

While most of us were celebrating the holidays, Congress was busy pushing an appropriations act through both houses.  This legislation includes what is referred to as the SECURE 2.0 Act of 2022 (SECURE 2.0). There are over 100 changes inside this legislation so we will highlight a few changes that might be pertinent to your retirement planning. To read a detailed section by section summary of the SECURE 2.0 Act of 22 from the Senate Committee on Finance, click here.

Increase in age for required beginning date for mandatory distributions. Under current law, participants are generally required to begin taking distributions from their retirement plans at age 72. SECURE 2.0 further increases the required minimum distribution age to 73 starting on January 1, 2023 – and increases the age further to 75 starting on January 1, 2033. The provisions are applicable as follows: In the case of an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the required beginning date age is 73. In addition, in the case of an individual who attains age 74 after December 31, 2032, the required beginning date age is 75.

 

 

If you are already taking RMDs do you need to continue to do so?   YES, the change is only for those born in 1951 or later.

Creation of SIMPLE ROTH IRAS and SEP ROTH IRA

Effective for taxable years beginning after December 31, 2023 (yes, 2024 start date):

Higher Catch-up limit to those age 60, 61, 62, 63

               Looks like 60 is the new 50. SECURE 2.0 increases these limits to the greater of $10,000 or 50 percent more than the regular catch-up amount in 2025 for individuals who have attained ages 60, 61, 62 and 63. The increased amounts are indexed for inflation after 2025.

IRA Catch-up Contributions to be indexed for inflation

Limited 529-to-ROTH IRA Transfer Allowed after 15 years. The ROTH IRA receiving the funds must be in the name of the beneficiary of the 529 plan, plan must have been maintained for 15 years or longer, any contributions within the last 5 years (and the earnings) are ineligible to be moved. Lifetime maximum transfer amount allowed is $35,000.        

Saver’s Match. SECURE 2.0 repeals and replaces the current credit with respect to IRA and retirement plan contributions.  The new act changes it from a credit paid in cash as part of a tax refund into a federal matching contribution that must be deposited into a taxpayer’s IRA or retirement plan. The match is 50 percent of IRA or retirement plan contributions up to $2,000 per individual. The match phases out between $41,000 and $71,000 in the case of taxpayers filing a joint return.

Qualified Charitable Donations- (QCDs) are still available to IRA owners aged 70.5 and higher. The current limit is $100,000. The new change includes an index for inflation. There is also a once in a lifetime $50,000 rollover permitted it a Charitable Gift Annuity or Charitable Remainder Trust

Enhanced Opportunities to Access Retirement Funds in times of need.  Terminal illness Distribution, victims of domestic violence, a new $1000 hardship withdrawal, potential distribution to pay for long term care, and the potential of a linked emergency savings account.

Other 2024 options for employer plans:

Employers can match student loan payments if Employer adopts Employer can match

Military Spouse- incentives for retirement plan participation

 

This is a very abbreviated summary of 4,000 pages of legislation (link at top. Please reach out to us if you need further clarification on these changes and how it might impact you. As the world of personal finance gets increasingly complicated, we aim to help you understand and organize your financial life.

CRN-5396995-010523

 

Charlotte Geletka is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker-dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Silver Penny Financial Planning is a marketing name for registered representatives of Lincoln Financial Advisors Corp. Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.