What You Need to Know About the SECURE Act 2.0
The SECURE Act 2.0 has recently been passed, bringing a number of changes to retirement planning. If you’re wondering how these changes affect you, keep reading for a breakdown of the most important updates.
Increased Required Minimum Distribution Age
One of the most significant changes brought about by the SECURE Act 2.0 is an increase in the required minimum distribution (RMD) age. Under the new law, individuals will not be required to take RMDs until they reach age 73. In 2033, the age requirement will increase to 75. This change gives individuals more time to build up their retirement savings before they are required to start withdrawing funds.
Elimination of Roth 401(k) RMDs
Beginning in 2024, Roth 401(k) RMDs will be eliminated under the SECURE Act 2.0. This means that individuals with Roth 401(k) accounts will no longer be required to take RMDs from those accounts after reaching the age of 73. This change makes Roth 401(k) accounts an even more attractive option for retirement planning.
Decreased Penalty for Missed RMDs
The SECURE Act 2.0 also reduces the penalty for missed RMDs. Previously, individuals who failed to take their RMDs on time were subject to a 50% penalty. Under the new law, the penalty has been reduced to 25%. It also decreases to only 10% if the issue is timely corrected by taking the missed RMD. This change is a welcome relief for those who accidentally miss an RMD deadline.
529 Plan Rollovers
The new SECURE Act also provides for rollovers from 529 Plans. Under this provision, 529 Plans that have been in existence for at least 15 years and have received contributions within the last 5 years qualify for the new rollover provision which allows up to $6,500 annually to be rolled over into a Roth IRA account, up to a total max of $35,000. This change provides another option for those with 529 Plans that have balances remaining after their intended purpose.
Employer Matching Contributions to Roth Accounts
Finally, the SECURE Act 2.0 allows employer matching contributions to be made to Roth accounts, in addition to traditional accounts. This means that individuals who contribute to a Roth 401(k) account can now receive matching contributions from their employer, just like they would with a traditional 401(k) account.
In conclusion, the SECURE Act 2.0 brings several important changes to retirement planning, including an increased RMD age, elimination of Roth 401(k) RMDs, decreased penalty for missed RMDs, 529 rollovers, and the ability to receive employer matching contributions to Roth accounts. By understanding these changes, you can make the most of your retirement planning and ensure a secure financial future. Contact us today if you would like to schedule an estate planning consultation to discuss these changes.