SECURE Act 2.0

Summit Wealth Advocates |
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Tax Planning
Retirement
charity
Finance

Another tax act has just become law and a few of the provisions could impact you.  Here are some of the changes coming from SECURE Act 2.0 that we feel you should be aware of.

Required Minimum Distributions (RMDs):

  • The age to start taking RMDs increases to age 73 on January 1, 2023 and to age 75 in 2033.
    • Note that if you turned age 72 prior to 12/31/2022, you will need to take your RMD in 2023 as previously expected.
  • The penalty for failing to take an IRA RMD will decrease to 25% of the RMD amount (from 50% at present) and 10% if corrected in a timely manner.
  • Beginning in 2024, RMDs are no longer required from Roth 401(k)s / 403(b)s in employer retirement plan accounts. This creates consistency with Roth IRAs, which  do not have RMDs.

Increase in Catch-Up Contributions:

  • Starting on January 1, 2025, individuals age 60 – 63 will be able to make catch-up contributions to their retirement plan of up to $10,000 annually.  The $10,000 will be indexed to inflation.
  • IRA accounts currently have a $1,000 catch-up limit for those age 50+.  Beginning in 2024, the $1,000 limit will also be indexed for inflation meaning it could increase each year.
  • Currently, matching contributions for Roth 401(k)s and 403(b)s are made on a pre-tax basis.  Moving forward, employers will be able to provide each employee the option to receive matching contributions to Roth accounts. However, such Roth matching amounts will be included in an employee’s reported income.

Other Provisions: 

  • Qualified Charitable Distributions (QCDs):  Beginning in 2023, people age 70½ and older may elect (as part of their QCD limit) a one-time gift of up to $50,000 to a Charitable Remainder Unitrust (CRUT), a Charitable Remainder Annuity Trust (CRUT) or a Charitable Gift Annuity.  
  • Student Loan Debt:  Beginning in 2024, employers can “match” employee student loan payments with matching contributions to a retirement plan account.  This benefit gives employees an extra incentive to begin saving by paying down their student loans.
  • 529 Plans:  After a 529 Plan account has been opened for at least 15 years, 529 Plan assets can be rolled over into a Roth IRA account for the beneficiary.  This benefit is limited to the annual Roth contribution limits and to an aggregate lifetime maximum of $35,000.  Note that any rollover is treated as a contribution towards the annual Roth IRA contribution limit.