The SECURE 2.0 Act is changing the landscape of retirement planning for Americans. If you’re thinking about your financial future or legacy, understanding SECURE 2.0 is crucial. In this article, we’ll break down the biggest changes, explain how they affect your retirement strategy, and show you how to take advantage of the new rules-especially if you already work with a Registered Investment Advisor (RIA) or wealth management firm.
What Is SECURE 2.0?
The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0, signed into law in late 2022, builds on the original SECURE Act of 2019. Its goal is to make it easier for Americans to save for retirement, access their savings, and pass on wealth to future generations.
Key SECURE 2.0 Changes That Affect Retirement Planning
1. Required Minimum Distributions (RMDs) Start Later
- The age to start taking RMDs from traditional IRAs and 401(k)s increased to 73 in 2023 and will rise to 75 by 2033.
- The penalty for missing an RMD is now lower, making it less costly if you make a mistake.
2. Bigger Catch-Up Contributions
- Starting in 2025, people aged 60-63 can contribute even more to their 401(k) or 403(b) plans-up to the greater of $10,000 or 150% of the standard catch-up amount.
- IRA catch-up contributions for those 50+ will adjust for inflation.
- Beginning in 2026, high earners must make 401(k) or 403(b) catch-up contributions to Roth accounts, which are funded with after-tax dollars.
3. Automatic Enrollment in Retirement Plans
- New 401(k) and 403(b) plans must automatically enroll eligible employees beginning in 2025. This helps more people start saving early.
- Part-time workers also get easier access to retirement plans.
4. More Roth Account Options
- No more RMDs for Roth 401(k) accounts starting in 2024. Your Roth assets can grow longer, tax-free.
- SIMPLE and SEP IRAs now allow Roth contributions, giving small business owners and the self-employed more flexibility.
5. Easier Emergency Withdrawals
- You can take out up to $1,000 per year from your retirement account for emergencies, penalty-free.
- Special exceptions exist for hardships like domestic abuse or terminal illness.
6. 529 Plan Rollovers to Roth IRAs
- Leftover 529 college savings can now be rolled into a Roth IRA for the beneficiary, within certain limits. This is a new way to help your children or grandchildren build retirement savings.
How SECURE 2.0 Impacts Your Retirement and Legacy Planning
Tax Planning Opportunities
- Delayed RMDs mean your retirement savings can grow tax-deferred for longer. This gives you more time to consider Roth conversions, which can reduce future taxes for you and your heirs.
- Larger catch-up contributions let you save more during your highest-earning years.
Legacy Planning Advantages
- With the elimination of RMDs for Roth 401(k)s, you can pass on more tax-free wealth to your beneficiaries.
- The 10-year rule for inherited IRAs still applies, but new Roth options and 529 rollovers give you more ways to support your family’s future.
Better Retirement Plans for Business Owners
- If you own a business, SECURE 2.0 makes it easier to offer attractive retirement benefits, including automatic enrollment and Roth options.
- These changes can help you recruit and retain top talent while also securing your own retirement.
What Could You Do Next?
- Review Your Retirement Accounts: Make sure your savings strategy takes advantage of these new rules.
- Update Your Estate Plan: Double-check beneficiary designations and legacy strategies.
- Talk to a Financial Advisor: SECURE 2.0 is complex. A professional, such as any of our Advisors at Certuity, can help you maximize the benefits and avoid pitfalls.
Final Thoughts
SECURE 2.0 brings important changes that can help you grow and protect your retirement savings. Whether you’re nearing retirement or just starting out, now is the time to review your plan. Working with an RIA or wealth management firm like Certuity ensures you’re making the most of these new opportunities for your financial future and legacy.
If you have questions about how SECURE 2.0 affects your retirement, contact Certuity today to schedule a personalized review.