What are some of the important parts of the Secure Act 2.0?

It has been a couple of months since the passage of the Secure Act 2.0 (end of December 2022), and we wanted to summarize some of the more immediate provisions that could be important for your planning purposes.

Summary of Secure Act 2.0 Provisions that go into effect in 2023:

  1. A change in starting age for Required Minimum Distributions from IRAs, etc. is now age 73, rather than age 72.  (In 2033, it will increase to age 75).  If you were planning to start your RMDs in 2023, we now have another year to plan.
  2. Roth 401(k): If you participate in an Employer’s Retirement Plan 401(k) using the Roth option for your salary contributions, you will also be able to elect to have your matching employer contributions made to the Roth 401(k) as well.
    • The employer contributions WILL be added to your income, so check with your tax preparer prior to making any changes.
    • It may take a little while for employers to get their options up to speed, so it may not be available to you immediately.
    • This can be a great option, especially early in your career.
  3. Retirement Plan Catch-Up Contributions: The amount set for catch-up contributions (over age 50) to employer retirement plans is now $7500. For Simple IRA catch-up contributions, the amount is $3500.
  4. Regarding 529 plans: Though it does not become available until 2024, there is a NEW provision that enables the 529 owner to rollover part of the unused portion of the 529 to a ROTH IRA for the beneficiary!
    • The 529 must have been established for a minimum of 15 years
    • The maximum you can rollover to a Roth IRA is generally $6500 per year (currently), up to a maximum of $35,000 lifetime.
    • This provides even more planning opportunities, as it is not restricted by income limits.

There is a LOT more contained in this legislation, but a great deal of it applies to future years or is applicable to very specific populations.  We will be working to keep you posted as we learn more, so stay tuned!