SECURE Act 2.0

Hidden within the recent $1.7 trillion Omnibus spending bill is something that can directly impact your retirement. Dubbed the SECURE Act 2.0, an extension of the original SECURE Act signed into law in 2019, the comprehensive retirement security bill aims to improve and expand retirement savings options for Americans, particularly those who are self-employed or work for small businesses.

Some of the key provisions of the Secure Act 2.0 include:

  • Increasing the age for required minimum distributions: The Secure Act 2.0 would raise the age for required minimum distributions (RMDs) from 72 to 73 in 2023 for anyone reaching 73 in 2023 and to 75 starting in 2033, giving retirees more flexibility to leave their retirement savings untouched for longer.
  • Increased flexibility for 529 Accounts: The bill would allow for a tax-free rollover of 529 accounts to a Roth IRA. This would benefit those who may have overfunded a 529. Additionally, the income limits for contributing to a Roth IRA is removed for the 529 to Roth IRA rollover; however, the annual contribution limits remain. Please note, there will be a lifetime limit of $35,000 and the 529 must have been open for 15 years.
  • Allowing Roth contributions to SIMPLE and SEP Roth IRAs: Currently, SIMPLE IRAs and SEP IRAs do not allow for Roth contributions. The bill allows for Roth contributions to these types of accounts.
  • Treating catch-up contributions as Roth: Currently, these contributions can be Roth or pre-tax. The SECURE Act 2.0 would require that all catch-up contributions be subject to Roth tax treatment.
  • Increased flexibility for employer matching: Currently, employer matching must be pre-tax. Under this provision, employers will be able to let participants in 401(k), 403(b), and governmental 457(b) plans receive matching contributions on a Roth basis.

If you have any questions about the SECURE Act 2.0, please do not hesitate to contact us.

 

This material and the information contained herein is as of the date of its publication, is subject to change, and is general in nature. Such information is provided for your convenience and informational purposes only and should not be considered legal, tax, or compliance advice. Federal and state laws and regulations are complex and are subject to change. Laws of a specific state or laws that may be applicable in particular circumstances may affect the applicability, accuracy, or completeness of this information. This information is not individualized and may not be inclusive of everything that a firm should consider in this type of planning decision. There may be other factors that you should consider. You should consult an attorney, tax professional, or compliance advisor regarding your specific legal or tax circumstances and plans.

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