Secure Act 2.0 was passed on December 29th, 2022. Initially the new law was to be in effect by the end of December 2022, however its implementation for Retirement plans has been extended to December 31, 2025. Here in this blog, I’ll share the main highlights of the law. There are many articles written on it and you can find them by simply doing a Google search. Should you have any questions or you find something confusing then please reach out to me.
Here are the highlights:
- Required Minimum Distribution (RMD) increases to age 73 in 2023 and age 75 in 2033. Considering rising life expectancy and people working a lot longer than the usual than the traditional retirement age, this helps in delaying taking RMD, which helps reducing Income Taxes.
- Failing to take RMD penalty will decrease to 25% from 50% currently. Again, a huge benefit for the retirees as 50% of penalty was quite severe.
- Roth 401K plans are getting a boost and starting 2024 RMDs won’t be required from the Roth 401K accounts – currently this benefit is only available to the traditional Roth IRA accounts.
- Starting January 1, 2025, if you’re ages 60-63, the catch-up contribution will increase by $10,000. Again, it is a huge boost for the individuals who are planning to retire at the age of 65 or above.
- Employers will be able to provide matching contributions to the Roth Accounts mainly the Roth 401K on a post-tax basis – this again is a great option for workers, especially for the young ones to get employer matching for their Roth accounts which can withdrawn after 59 ½ with no income taxes and RMD requirements (note bullet 3 condition for Roth 401K)
Again, please reach out to Blue Aris should you require further help or assistance.
Reference – Link to the Fidelity article for more details – https://www.fidelity.com/learning-center/personal-finance/secure-act-2