It’s a new New Year and a new law called SECURE 2.0 Act of 2022 could have an impact on your retirement savings and withdrawal strategies. SECURE 2.0 is part of the Consolidated Appropriations Act (CAA) of 2023 and it clarifies and sometimes expands the SECURE Act of 2019.
See below for a few key takeaways from the new law from HBC’s Wills, Trusts & Estates team. Note that this summary information is not exhaustive and we recommend that you consult your legal, tax or financial advisors before making any changes.
Favorable Changes for RMDs
Starting January 1, 2023, the age that owners of retirement accounts must start taking required minimum distributions (RMDs) will be pushed back to 73. So now you have an additional year to delay taking a mandatory withdrawal from your retirement accounts. And for those who won’t turn 74 until after December 31, 2022, they are able to push back their RMD starting date to age 75. This deferral allows participants to enjoy longer tax-deferred compound earnings.
Playing catch-up
For those aged 50 or older, the retirement plan contribution limit (“catch-up contributions”) increased for inflation from 2022. For 2023, the catch-up contribution amount is limited to $7,500 for most retirement plans.
A new exciting provision to encourage more retirement savings takes effect January 1, 2025, when people ages 60 through 63 years old will be able to make catch-up contributions up to $10,000 annually to a workplace plan. Certain higher earnings may only make these bonus catch-up contributions as Roth contributions.
Good news for students
Starting in 2024, employers will be able to "match" employee student loan payments with matching payments to a retirement account, giving workers an extra incentive to save while paying off educational loans.
For 529 plans at least 15 years old, 529 plan assets can be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000.
Expanded giving opportunities through QCDs
Beginning in 2023, people 70½ and older may elect as part of their qualified charitable distributions (QCDs) limit a one-time gift up to $50,000, adjusted annually for inflation, to a charitable remainder unitrust, a charitable remainder annuity trust, or a charitable gift annuity. This is an expansion of the type of charity that can receive a QCD.
Automatic enrollment and plan portability
Beginning in 2025, businesses adopting new 401(k) and 403(b) plans are required to automatically enroll eligible employees, starting at a contribution rate of at least 3%. The law also permits retirement plan service providers to offer automatic portability services, transferring an employee's low balance retirement accounts to a new plan when they change jobs.
SECURE 2.0 is intended to provide increased opportunities to save for retirement, but since everyone's financial situation is different, as always, consult your tax, legal or financial advisor to understand how the SECURE 2.0 Act applies to you.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. This information shall not be construed as legal advice.