As 2022 came to a close, Congress passed revisions to the retirement rules previously known as the SECURE (Setting Every Community Up for Retirement Education) Act. There are several provisions that have been revised and they have been rolled out under the name of SECURE Act 2.0.

Please note that the information provided here is not an exhaustive list of updated provisions. We encourage you to reach out to your Atlas Wealth Management Advisor for any questions you might have regarding the following updates.

Revised Distribution Rules

  • Required minimum distribution (RMD) age increases. Individuals born between 1951 – 1959 are now required to begin taking distributions at age 73 and those born in 1960 and beyond will not need to begin distributions until they turn 75. Prior to this update, if you had already turned 72 and have already begun to take distributions you must continue to do so.
  • Missed RMDs (or distributing too little) penalty reduction from 50% to 25% of the shortfall, and if the mistake is corrected in a timely manner, the penalty is reduced to 10%.
  • Access to funds. Plan participants can use retirement funds in an emergency without penalty or fees. For example, 2024 onward, an employee can take up to $1,000 from a retirement account for personal or family emergencies. Other emergency provisions exist for terminal illnesses and survivors of domestic abuse.

Revised Roth Rules

  • Beginning in 2024, new legislation will eliminate RMDs (required minimum distributions) for Roth accounts. Examples include a Roth account in employer-sponsored 401(k) or 403(b) savings plan or an individual Roth IRA.
  • Before the passing of the Act, SIMPLE (Savings Incentive Match Plan for Employees) IRAs and SEP (Simplified Employee Pension) IRAs could only accept pre-tax funds. Now, for tax years starting in 2023 both SEP and SIMPLE IRAs can offer a Roth option.
  • Effective upon enactment, employers will be permitted to deposit matching and/or nonelective contributions to employees’ designated Roth retirement plan accounts. Such amounts will be included in the employee’s income in the year of contribution and must be nonforfeitable.
  • 529 to a Roth. Starting in 2024, pending certain conditions, individuals can roll a 529 education savings plan into a Roth IRA for the beneficiary. Therefore, if your child receives a scholarship, goes to a less expensive school, or does not go to school, the money can get repositioned into a retirement account. However, rollovers are subject to the annual Roth IRA contribution limit. In addition, the aggregate amount that can be rolled to an individual over the course of their lifetime is $35,000. Roth IRA distributions must meet a five-year holding requirement and occur after age 59½ to qualify for the tax-free and penalty-free withdrawal of earnings. Tax-free and penalty-free withdrawals are also allowed under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.
  • High income employee, ages 50 and over, catch-up contributions must go into a Roth retirement plan account in 2024. Starting in 2024, individuals that make over $145,000 in wages will no longer be able to make pre-tax catch-up contributions to their employer-sponsored retirement plan.

New Accumulation Rules

  • Enhanced catch-up contributions. Individuals ages 60-63 will have higher catch-up limits starting in 2025…
    • Catch-up contribution maximum for employer plan participants is the greater of $10,000 (indexed for inflation starting in 2026) or 150% of annual catch-up amount, indexed to start in 2024.
  • SIMPLE Plan participants catch-up contribution limit increased to the greater of $5,000 or 150% of the regular SIMPLE catch-up contribution amount for 2025 (indexed for inflation). However, the law applies certain stipulations to individuals with annual earnings more than $145,000.
  • Student loan matching. In 2024, companies can match employee student loan payments with retirement contributions. The rule change offers workers an extra incentive to save for retirement while paying off student loans.
  • Automatic enrollment. In 2025, the Act requires employers to automatically enroll employees into workplace plans. However, employees can choose to opt-out.

Additional Updates for Your Consideration:

  • Qualified Charitable Donations (QCDs). Beginning in 2024, the $100,000 annual max limit will be indexed for inflation.
  • One-Time Opportunity to use QCD To Fund a Split-Interest Entity. Beginning in 2023, taxpayers may take advantage of a once-in-a-lifetime $50,000 (indexed) QCD to fund a Charitable Remainder UniTrust (CRUT), Charitable Remainder Annuity Trust (CRAT), or Charitable Gift Annuity (CGA).
  • Support for small businesses. In 2023, the new law will increase the credit to help with the administrative costs of setting up a retirement plan. The credit increases to 100 percent from 50 percent for businesses with less than 50 employees. By boosting the credit, lawmakers hope to remove one of the most significant barriers for small businesses offering a workplace plan.

The change in retirement rules does not necessarily mean adjusting your current strategy is appropriate. Each of your retirement assets plays a specific role in your overall financial strategy, so a change to one (if appropriate) may require changes to another. 

If you have any questions about the SECURE Act 2.0, or other financial matters that you would like to discuss, please feel free to contact your Atlas Wealth Management Advisor or Robert Palmer, Atlas’ Director of Financial Planning. They will be happy to discuss your specific situation with you.

Robert Palmer, CFP®, RICP® | Director of Financial Planning

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2023 FMG Suite.

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