SECURE ACT 2.0

The SECURE (Setting Every Community Up for Retirement Enhancement) Act 2.0. is a follow up package to the original SECURE Act in 2019. It provides further flexibility to retirement and savings related issues. While the SECURE ACT 2.0 offers improved opportunities to save for retirement, everyone’s financial situation is unique and different. It is always a best practice to consult your tax professional to understand how the SECURE ACT 2.0 may impact your personal situation. With over 90 new provisions we are going to highlight some of the key new provisions that will be going into effect over the next few years.

Required Minimum Distributions:

  • The age to start taking RMDs increases to age 73 in 2023 and to 75 in 2033.
  • The penalty for failing to take an RMD will decrease substantially and starting in 2024 RMDs will no longer be required for Roth accounts in employer retirement plans.

529 College Savings Plans:

  • Allows more flexibility for certain assets in a 529 plan to be rolled over into a Roth IRA after 15 years.
  • 529 plan assets will be subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000.
  • The rollover will be treated as a contribution towards the annual Roth IRA contribution limit.

Emergency savings:

  • Helps to provide additional savings for short-term and unexpected expenses.
  • Two different ways for participants to access emergency savings.
  • Participants can create a post-tax ESA (Emergency savings account) Starting in 2024 contributions would be limited to $2,500 annually or lower, as set by the employer. The first 4 withdrawals in a year would be tax and penalty-free.
  • The second provision allows employees the opportunity to withdraw up to $1,000 per calendar year without being subject to an early withdrawal penalty. Participants would need to repay the amount in three years and would not be able to withdraw again until the amount is repaid.

Student Loans:

  • Starting in 2024, employers can make matching contributions to a defined contribution plan on qualified student loan payments. Ultimately giving workers an extra incentive to save while paying off educational loans.

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