By Ryan Turbyfill, MBA Financial Advisor
The SECURE 2.0 Act is legislation that substantially changed retirement account rules. The main objective of the law is to encourage more workers to save for retirement. Some requirements are currently in place or will become effective in the coming year (or years). Below we highlighted many of the most significant changes with potential implications for your retirement planning.
Required Minimum Distributions (RMD): RMDs are mandatory withdrawals that investors must take from retirement accounts starting at age 73. Generally, RMDs must be withdrawn by the end of the year. Your first distribution, however, can be delayed until April 1 of the following year.
RMD for Roth Plan Accounts: Previously only Roth IRA accounts did not have RMD requirements, however now Roth Plan Accounts such as Roth 401k, Roth 403b and Roth 457b don’t have Required Minimum Distribution requirements either.
Roth for SIMPLE and SEP IRA’s: Previously Roth deferrals were not allowed for SEP or SIMPLE IRA’s which are popular plans for self employed or small companies. Now Roth SEP and Roth SIMPLE IRA’s are an option. However, many custodians have not made this available yet as they are updating their systems and understanding the details of this change.
529 to Roth IRA Transfer : The popular education account, the 529 used to have limited options without penalty if all funds were not used by the beneficiary of the plan. Starting 2024 unused funds can be transferred into a Roth IRA for the beneficiary, however there are some stipulations. 1) The 529 must be open for 15 years or more 2) Limited to $35k 3) Contributions in the last 5 years are not eligible to transfer 4) There is an annual limit depending on contributions directly to a Roth or Traditional IRA
Increased Plan Catch Up Contributions for those in their early 60’s: The IRS allows a “catch up” contributions for IRA’s of an additional $1,000 to those 50 and over, $3,500 for SIMPLE IRA and an extra $7,500 in a 401(k) and 403(b). New for 2025, However, investors in 401ks age 60 to 63 can save $11,250 for catch-up contributions based on changes enacted via Secure 2.0.
One-Time Opportunity To Use QCD To Fund A Split-Interest Entity: Those over 70.5 years old have a one-time opportunity to use a QCD (Qualified Charitable Distribution) to fund a Charitable Remainder UniTrust (CRUT), Charitable Remainder Annuity Trust (CRAT), or Charitable Gift Annuity (CGA).
Emergency Withdrawals: The Secure 2.0 Act allows eligible participants to make a one-time, penalty-free withdrawal of up to $1,000 from their 401(k) for emergency expenses in 2025. Examples of emergency expenses include medical expenses, car repairs, foreclosure, accidents, and funerals or burials.
Auto Enrollment: Starting in 2025, most new 401k and 403b plans will be required to have an automatic enrollment for employees.
ABLE Accounts Expanded to Older Disabled Individuals: Currently, only those under 26 years old are able to open an ABLE account, however in 2026 the age will be extended to those under 46 years old.