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SECURE Act 2.0 – What’s Changing in 2023 & 2024 Thumbnail

SECURE Act 2.0 – What’s Changing in 2023 & 2024

The SECURE Act 2.0 Act creates a number of changes to retirement planning. Here we summarize several key provisions that take effect this year and next.

This Year's Changes (2023)

Several changes have already come into effect this year:

  1. Required Minimum Distribution (RMD) Age Increase: The age for taking required minimum distributions (RMDs) is raised from 72 to 73. Those already subject to RMDs must follow their existing schedules. By 2033, the RMD age will rise further to 75.
  2. Reduced Penalty for Missed RMDs: The penalty for missing RMDs has been reduced. If corrected "timely," the penalty drops from 50% to 25%, and in some cases, even 10%. You can also request a penalty waiver.
  3. Statute of Limitations: A statute of limitations is now in place for missed RMDs (three years) and excess contributions (six years from the tax-filing deadline). Previously, no such limitations existed.
  4. Roth Contributions to SEP and Simple IRAs: Roth (after-tax) contributions are now allowed for SEP and Simple IRAs, which were previously limited to pretax contributions.
  5. Roth Employer Matching Contributions: Employees can opt for Roth taxation on employer matching contributions to Roth accounts, paying the income tax on this amount.

Next Year's Changes (2024)

Looking forward to 2024, some of the changes that will take effect include:

  1.  Inflation-Indexed Catch-Up Contributions: The $1,000 catch-up contribution for individuals aged 50 and above to IRAs and 401(k)s will be indexed for inflation.
  2. 529 Account Beneficiary Rollovers: Beneficiaries of "529" education-savings accounts can roll over up to $35,000 of remaining funds into a Roth IRA in the beneficiary's name, provided the 529 has been active for at least 15 years.
  3. Roth 401(k) RMD Exemption: Roth 401(k) contributions will no longer be subject to RMDs during the owner's lifetime, aligning with laws governing Roth IRAs.
  4. Employer Matching on Student Loan Payments: Employer matching contributions can now be made on student loan payments, similar to 401(k) contributions.

The Secure 2.0 Act brings a series of changes that will impact retirement planning strategies for years to come. If you have questions about how these or other provisions impact your individual situation, please contact us to discuss.