Six Key Takeaways From the SECURE Act 2.0
- Changing the age of the required minimum distributions. Three years ago, 1.0 increased the age for taking the required minimum distribution, or RMD, to 72 years from 70½. If you turn 72 this year, the age required for taking your RMD rises to 73 with 2.0.
- RMD penalty relief. Beginning this year, the penalty for missing an RMD is reduced to 25% from 50%. And 2.0 goes one step further. If the RMD that was missed is taken in a timely manner and the IRA account holder files an updated tax return, the penalty is reduced to 10%.
However, while the penalty has been reduced, you’ll still pay a penalty for missing your RMD.
- Changes for employer-sponsored plans. Too many Americans do not have access to employer plans or simply don’t participate.
Starting in 2025, companies that set up new 401(k) or 403(b) plans will be required to automatically enroll employees at a rate between 3% and 10% of their salary.
- Increased catchup provisions. In 2025, 2.0 increases the catch-up provision for those between 60 and 63 from $6,500 in 2022 ($7,500 in 2023 if 50 or older) to $10,000, (the greater of $10,000 or 50% more than the regular catch-up amount). The amount is indexed to inflation.
Catch-up dollars are required to be made into a Roth IRA unless your wages are under $145,000.
- Charitable contributions. Starting in 2023, 2.0 allows a one-time, $50,000 distribution to charities through charitable gift annuities, charitable remainder unitrusts, and charitable remainder annuity trusts. One must be 70½ or older to take advantage of this provision.
- Back-door student loan relief. Starting next year, employers are allowed to match student loan payments made by their employees. The employer’s match must be directed into a retirement account, but it is an added incentive to sock away funds for retirement.
What we have provided here is a high-level overview of the SECURE Act 2.0. Keep in mind that it is not all-inclusive.
We are here to assist you, answer your questions, and tailor any advice to your specific financial situation.
Original Article: HorsesMouth
Sources: [[https://images.thinkadvisor.com/contrib/content/uploads/documents/415/479719/GA_SECURE-2.0-Act-of-2022_Section-by-Section-Summary-FINAL.pdf Secure Act 2.0 Act of 2022]]; [[https://www.fidelity.com/learning-center/personal-finance/secure-act-2 SECURE 2.0: Rethinking Retirement Savings]]; [[https://www.schwab.com/learn/story/congress-passes-major-boost-to-retirement-savings Congress Passes Major Boost to Retirement Savings]]; [[https://www.wsj.com/articles/WP-WSJ-0000441889 The 401(k) and IRA Changes to Consider After Congress Revised Many Retirement Laws]]