Last month I wrote about Secure 2.0, the collection of provisions intended to build upon the retirement system improvements that were implemented under the Secure Act of 2019.
Secure 2.0 became law on December 29, 2022.
There are many provisions to this new law. I participated in a webinar led by a leading consultant to financial planners, who said that in Secure 1.0, there were twelve or so changes to the law. Secure 2.0 brings almost one hundred additional changes.
Susan and I will be digesting Secure 2.0 in the weeks ahead to better understand how these changes might affect you and your financial plan.
Here are a few of the key changes to be aware of:
Required Minimum Distributions (RMDs)
- For individuals who turn 72 in 2023, RMDs will be pushed back one year compared to current rules and will begin at age 73
- Age 73 will continue to be the age at which RMDs begin through 2032
- Then, beginning in 2033, RMDs will be pushed back further to age 75
- Beginning in 2024, surviving spouses can elect to be treated as the decedent for RMD purposes from an inherited retirement account. This is beneficial for older spouses inheriting retirement accounts from younger spouses.
Retirement Plan Catch Up Contributions
- Effective in 2025 and in future years, Secure 2.0 adds a special catch-up contribution limit for employees aged 60, 61, 62, and 63: the greater of $10,000 or 150% of the regular catch-up contribution amount (indexed for inflation)
- Starting in 2024, Secure 2.0 requires all catch-up contributions for workers with wages over $145,000 during the previous year to be deposited into a Roth
Qualified Charitable Distributions (QCDs)
- The maximum annual QCD amount of $100,000 is now indexed for inflation
- There is no change to the age for being able to make QCDs from your retirement accounts – you may start at age 70.5
529 Plans
- For 529 plans that have been in existence for 15 years or longer, you are allowed to transfer them into a Roth IRA for the beneficiary, and it appears that you will be able to change the beneficiary of the 529 before transferring it to the Roth
- Any contributions to the 529 plan within the last five years are ineligible to be moved to a Roth IRA
- The maximum amount that can be moved from a 529 plan to a Roth IRA in an individual’s lifetime is $35,000
There are also a host of new rules for accessing retirement funds during times of need.
