Congress spent the final days of 2022 on new reforms designed to help Americans save more for retirement.
You may have recently heard of SECURE Act 2.0, which is a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act enacted into law in late 2019. 1
The SECURE Act 2.0 is a voluminous piece of legislation, containing more than 90 new provisions. My aim is to offer an overview of the changes, however, please note that each provision has its own rules, restrictions and effective dates.
Notable Required Minimum Distribution (RMD) Updates:
The age at which a retirement account owner must begin taking required minimum distributions (RMDs) has been increased to age 73. Starting in 2033, RMDs will be required for individuals with retirement accounts at age 75.
If you have already begun taking your RMDs, you'll continue as expected. This change will not be applied retroactively.
Additional Key Features of the SECURE Act 2.0:
- There are new Roth-related provisions and benefits. The act did not eliminate the back-door Roth or the ability to convert to a Roth IRA.
- The ability to convert 529 plans to Roth IRAs (several restrictions apply)
- Catch-up amounts in IRAs and employer retirement plans for those age 50 and over have increased.
- The act also provides enhanced access to retirement plans in times of need, terminal illness, or in times of disaster recovery.
- Emergency Savings Accounts (ESA) linked to employer retirement plan accounts.
- Expanded age eligibility for ABLE accounts effective in 2026.
The SECURE Act 2.0 is likely to impact one's retirement, income and tax planning. Financial Advisors, attorneys and CPAs are currently scouring the details and gaining clarification. There is sure to be more information forthcoming.