SECURE Act 2.0
Written by Erik Schuster, CFP® Financial Planner
The new law has something for everyone. From RMDs to student debt, here are the top 6 things you need to know.
One of the only guarantees in life is that things will always change. As we look at the new spending bill that passed towards the end of 2022, we find ourselves with several changes to the retirement system in America. Being touted as the SECURE Act 2.0, this new legislation immediately impacts those preparing for or already in retirement.
6 Big Takeaways from SECURE Act 2.0:
- It increases the age from 72 to 73 in 2023 (and 75 in 2033) for required minimum distributions (RMDs). In 2022, RMDs are the minimum amount of cash a retirement plan account holder is required to withdraw annually before they reach the age of 72. Any IRA or retirement account holder who has not reached the age of 72 by the end of 2022, will not have to take an RMD until the year they turn 73.
- Under current law, you can put an extra $6,500 annually in your 401(k) once you reach age 50. SECURE 2.0 would increase the limit to $10,000 (or 50% more than the regular catch-up amount) starting in 2025 for savers ages 60 to 63.
- While Roth IRAs come with no RMDs during the original account owner’s life, that’s not the case for Roth 401(k)s. Starting in 2024, the pre-death distribution requirement would be eliminated.
- Employees can elect to treat employer-matching contributions as Roth contributions. This optional treatment is available for contributions made after December 29, 2022.
- The current penalty for missing a required minimum distribution is 50% of the amount of the missed RMD. It will now drop to 25% and if corrected in a timely fashion, the penalty would be reduced to 10%.
- The current $100,000 limit for qualified charitable distributions will be indexed by inflation. Qualified charitable distributions, or QCDs, allow taxpayers over age 70 1/2 to contribute to charity from their IRA and avoid the recognition of income on the donated amount. The Act will also permit one-time gifts of $50,000 through a charitable trust or gift annuity.
While SECURE Act 2.0 provides more opportunities to save for your retirement, everyone’s financial situation is different.
Contact us today to understand how these changes apply to you!
This material is provided for informational purposes only. Opinions expressed herein are solely those of Thrive. None of the information contained in this document is intended to offer personalized investment advice and does not constitute an offer to sell or solicit any offer to buy a security or any insurance product and is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. The information contained herein has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Thrive.
