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Secure Act 2.0- retirement changes galore

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In 2022 the Secure Act 2.0 was approved for implementation over the next few years. The act has several changes that are designed to greater incentivize saving toward retirement. We wanted to provide a concise breakdown to highlight the sections that will have the greatest impact on the average person. 

Saver's Credit

Over the years a tax credit has been available for individuals that contribute money to their IRA, Roth IRA, 401(k), or ABLE account while in a lower tax bracket. The tax credit is being changed so that it is no longer a cash refund to the taxpayer, but rather a deposit into the retirement fund of the taxpayer's choosing. The credit is a 50% match up to $2,000 per individual and is phased out between $41,000 and $71,000 for married filing joint taxpayers. This change will be implemented after December 31, 2026, and the current retirement savings credit will remain in effect until then. 

529 Plan to Roth IRA Conversion

Starting in 2024 individuals who have maintained a 529 plan for more than 15 years will have the option to roll over the balance to a Roth IRA. The rollover will be limited to the Roth IRA contribution limit during the year that the 529 rollover is performed, and the individual will be limited to $35,000 in 529 to Roth IRA lifetime rollovers. 

Student Loan matching for Retirement

Starting December 31, 2023 employees who are unable to participate in their employer's 401(k) or 403(b) plan due to overwhelming amounts of student loan debt will have a new option available to them. If an employee cannot make contributions to their retirement account due to high student loan payments, the employer can elect to match the employee's payments for student loan debts with contributions to the employee's retirement account. This will allow the employee to take advantage of the employer's matching program while simultaneously paying off their student loan debt. 

Required Minimum Distributions

Currently, taxpayers required to take minimum distributions must begin doing so upon turning 72. The Secure Act of 2019 raised the age to 73 beginning January 1, 2023, and the Secure Act 2.0 raises the age yet again to 75 beginning January 1, 2033. This change will not be enforced for a several years but is something to be aware of for those approaching the standard retirement age of 65.

Another change to minimum distributions is that if a taxpayer does not make a timely required minimum distribution, the penalty will be decreased from 50% to 25%. The penalty will be further decreased to only 10% if the distribution is corrected promptly. 

The final change to required minimum distributions is that in 2024 RMDs will no longer be required from Roth accounts in employer retirement plans. Now employer-sponsored plans will follow the same regulations that non-employer Roth IRA accounts are required to follow. 

IRA catch-up contribution limit

Under the current laws for IRAs, a person who is 50 or older can contribute an additional $1,000 over the standard limit. Beginning December 31, 2023, the catch-up limitation will be adjusted for inflation. 

Starting January 1, 2025, the additional contribution limit for employees who are ages 60 through 63 and participate in an employer-sponsored retirement plan will have an increased catch-up contribution limit. The limit will be increased to the greater of $10,000 or 50% more than the regular catch-up amount. This amount will be adjusted for inflation in the future years.   


The Secure Act 2.0 has several other changes that impact more specific situations. If you are interested in discussing these changes or learning more please contact your investment advisor for advice regarding your specific situation. 



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