By Ryan Turbyfill, MBA  Financial Advisor

The SECURE 2.0 Act is legislation that substantially changed retirement account rules. The main objective of this new 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) The new Act raised the age that you must begin taking RMDs. For people who turn 72 in or after 2023, the age for required distributions has been raised from 72 to 73, and it will rise to 75 in 2033

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 For those who are 60-63 years old, there is now an additional catch up to that that was already in place to those over 50years old. Those 60-63 y/o will have the catch up increased to $10k or 150% of regular catch-up contributions in 2024 and after.  SIMPLE IRA’s catch up 60-63y/o increases to greater of $5k or 150% of catch-up contribution for 2025.  For exact specifics, please reach out.

One-Time Opportunity To Use QCD To Fund A Split-Interest Entity. Starting in 2023, 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 Beginning in 2024, an “emergency withdrawal” of $1,000 or less will not be subject to the normal 10% penalty for those under 59.5 years old.  There are some rules around this such as only allowed every 3 years, prior distributions must be paid back, etc.

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.  Why wait to change the law until 2026??  Who knows….

What Didn’t Change There was talk that the Back-Door and Limits on Roth Conversions were on the table; no changes made to that.  With the changes in Required Minimum Distribution age, the age for QCD (Qualified Charitable Distributions) remained at 70.5 years old.

There are many other changes beyond these highlights.  Additional changes include things like many catch up contributions are deemed Roth, Student Loans payments can be matched inside a retirement plan, many part time workers become eligible for 401k’s and even a “lost and found” online database to search for lost retirement accounts.

Please feel free to reach out anytime with questions and we will continue to implement changes to financial plans and recommendations.