The SECURE Act 2.0, signed into law in December 2022, introduces nearly 100 provisions aimed at enhancing retirement savings and flexibility. Here's how it could affect your financial plan:
1. Super Catch-Up Contributions (Ages 60–63)
- Starting in 2025, individuals aged 60–63 can contribute up to $11,250 annually to workplace retirement plans (401(k), 403(b), 457(b))—a significant increase from the standard catch-up limit of $7,500.
- This is a temporary window: once a person turns 64, they revert to the standard catch-up limit.
- Planning Tip: Budget ahead to take full advantage of this opportunity during peak earning years.
2. Mandatory Roth Catch-Up for High Earners
- Starting in 2026, individuals earning over $145,000 must make catch-up contributions to Roth accounts (after-tax), rather than traditional pre-tax accounts.
- This could reduce short-term tax deductions but offers tax-free growth and no RMDs in retirement.
- Planning Tip: Evaluate whether Roth contributions align with your long-term tax strategy.
3. RMD Age Changes
- The age for Required Minimum Distributions (RMDs) has increased:
- Born 1951–1959: RMD starts at age 73
- Born 1960 or later: RMD starts at age 75
- Penalty for missing RMDs reduced from 50% to 25%, and even 10% if corrected promptly.
- Planning Tip: Use the extra time for Roth conversions or strategic withdrawals.
4. 529 Plan Rollovers to Roth IRAs
- Starting in 2024, up to $35,000 from a 529 plan (open for at least 15 years) can be rolled into a Roth IRA.
- Planning Tip: This offers a way to repurpose unused education savings for retirement.
5. Emergency Withdrawals
- Allows penalty-free withdrawals of up to $1,000/year for emergency expenses.
- Planning Tip: Consider this as a backup liquidity option but use sparingly to preserve retirement savings.
6. Student Loan Matching
- Employers can match student loan payments with retirement contributions.
- Planning Tip: Younger individuals may want to take advantage of this dual benefit.
7. Saver’s Match for Low-Income Workers
- Replaces the Saver’s Credit with a federal match of up to $1,000/year starting in 2027.
- Planning Tip: This can boost retirement savings for eligible clients.
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