Broker Check
SECURE Act 2.0

SECURE Act 2.0

March 09, 2023

Recent Changes to Retirement Rules You Should Know: SECURE ACT 2.0 

Congress passed the second SECURE ACT (Setting Every Community Up for Retirement Enhancement) on December 23, 2022. What could this mean for you? There are more than one hundred different provisions in this bill that could change how you utilize your retirement savings plans. In this article, I will summarize some of the more significant changes.

New Accumulation Rules: Effective January 1, 2023, IRA and Roth IRA contributions for those under age 50 have been increased to $6,500 while those over 50 years old can contribute $7,500. For 401(k) plans, contributions of $22,500 can be made for those under 50, and up to $30,000 can be contributions for those over 50. Additionally, by 2025 employers will be required to automatically enroll employees in the retirement plan, however, employees can still opt-out.

New Distribution Rules: Effective January 1, 2023, the Required Minimum Distribution (RMD) age was increased to 73. This is a distribution you are required to take or face a penalty. If you have already turned 72 and begun distributions, those must continue. If an RMD is missed, the penalty has been reduced to 25% of the required amount, and if you fix the mistake in a timely manner, only a 10% penalty will be owed. In 2033, the RMD age will shift to 75.

Revised Roth Plan Rules: Individuals can choose to have employer matching contributions directed to the Roth portion of their account. These contributions will be counted as income in the current tax year and employees must be 100% vested in this part of their plan. Beginning in 2024, RMDs will be eliminated for Roth 401(k)s.

529 College plan to Roth IRAs: Do your children or grandchildren have overfunded 529 College Savings accounts? Starting in 2024, a total of $35,000 can be rolled into a Roth IRA from a 529 account per beneficiary! This is a great alternative to withdrawing the funds and being subject to a 10% tax penalty. The contributions are subject to annual Roth IRA contribution limits and the account must have been open for at least 15 years. This is a huge benefit for the beneficiaries that never went to college, went to a less expensive school, or received scholarships to pay for their education.

Penalty-free early withdrawals from retirement plans: Usually, a penalty of 10% is owed on funds withdrawn from 401(k)s or IRAs before age 59 ½ years old. In 2024, the Act provides for withdrawals of up to $1,000 per year with no added penalty for certain emergency expenses seen as unanticipated immediate needs. This can be repaid over a three-year period.

Updates for Qualified Charitable Distributions (QCD): A QCD allows an IRA account owner older than 70 ½ to send up to $100,000 per year to any 501(c)(3) directly without paying income tax. This type of distribution does count towards the individual’s RMD. Effective 2024, this annual cap will increase with inflation. Effective this year, individuals can contribute a one-time QCD of $50,000 to fund a Charitable Remainder Unit Trust (CRUT).

Expanded credit for retirement plans admin costs: Do you own a business but have not set up that company retirement plan because the cost was intimidating? The Act increases the current credit to 100% of the first three years of administration costs subject to a $5,000 annual cap. This benefit is for companies with less than 100 employees. There is opportunity for an additional credit of $1,000 per employee for companies under 50 employees. Check with you CPA to see if this is the year to get that retirement plan going.

Again, there are many pieces to this new bill, but I trust that this summation is helpful. We would be happy to discuss your questions so please contact our team today!



Jonathan “Josh” Sheard offers securities and advisory services offered through Centaurus Financial, Inc. member FINRA and SIPC and a registered investment advisor. This is not an offer to sell securities, which may be done only after proper delivery of a prospectus and client suitability is reviewed and determined. Information relating to securities is intended for use by individuals residing in AL, DE, FL, GA, IN, NJ, NY, NC, OK, PA, SC, TN, TX, and VA. Sage Investments, LLC and Centaurus Financial Inc are not affiliated.