SECURE Act 2.0

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EP Wealth Advisors

You might have heard about the SECURE Act 2.0 in the news recently and wondered “what is that all about?”

Many people are wondering the same thing, especially those in retirement and everyone who is close to retirement as well. Some of the changes will apply immediately in 2023, and others in later years through 2027. There is much to learn about this act and how it will change things for retirees and those planning for retirement.

What is the SECURE Act?

The SECURE Act, also known as the Setting Every Community Up for Retirement Enhancement act, is meant to help people retire.

The first version of the SECURE Act was passed in 2019, which changed certain aspects like the Required Minimum Distribution (RMD) age from 70 ½ to 72. Things like eliminating an age limit on IRA contributions, access to penalty free withdrawals of up $5,000 per year from a workplace savings plan for expenses related to the birth or adoption of a child, and much more were made possible as well.

The SECURE Act was established to help incentivize people to save and invest for retirement, and there are more changes coming to promote that further.

What does the SECURE 2.0 change?

With the second iteration of the SECURE Act, there is a proposal to change some of the rules the first version brought into practice.

To start, the RMD age will be moved to 73 beginning in 2023 and age 75 beginning in 2033. A big goal of the SECURE Act 2.0 is to allow retirees to take their RMD’s later so they can hold on to their money longer, allowing it to potentially grow in their accounts.

The SECURE Act 2.0 would allow for the creation of Roth SIMPLE IRAs and Roth SEP IRAs beginning with the 2023 tax year. This change will make huge strides for employees with SIMPLE IRAs and SEP IRAs as they will now be able to have a Roth option to enhance their savings.

The new law also permits 529 to Roth IRA rollovers! These rollovers are subject to limits, which consist of:

  • 529 must have been held for a beneficiary for at least 15 years.
  • Contributions and related earnings in the last 5 years are not eligible.
  • Must be a direct trustee-to-trustee transfer.
  • Annual rollover limit is the amount eligible to be contributed to a Roth IRA reduced by any contributions made for that year.
  • Total lifetime rollovers may not exceed $35,000.

Beginning in 2025, workers aged 60-63 would be allowed to make a catch-up contribution of $10,000. That is a 50% hike over the current catch-up contribution limit of $6,500, allowing people to catch-up later in their retirement journey.

Also, Qualified Charitable Distribution (QCD) annual limits ($100,000) are now indexed due to inflation, and this can still begin after the taxpayer reaches 70.5.

These are just a few of the changes that will be made, and the full list can be accessed here. All these changes are meant to benefit you in saving for your retirement best and to maintain your savings better when in retirement.

What does this mean for you?

As for how the SECURE Act 2.0 affects you, it should ultimately be helpful in the long run!

Waiting longer to take RMD’s, more flexibility for investment opportunities, and more benefits for those who are still working is just the start. The goal of this program is to help people save for retirement and those who are in retirement so they can plan to make their goals attainable. To learn more about the SECURE Act, please reach out to us with any questions.

 

Disclosures:

The information presented here is not intended to be regarded as a comprehensive list of considerations, including but not limited to, categories, services, or qualifications that a client or prospective client should consider when assessing or comparing Financial Advisors and/or Firms. As the author of this piece, EP Wealth Advisors, LLC (“EPWA”) has tailored the messaging of this article to align with the categories, services, qualifications, capabilities and services that it offers.. EPWA makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented. EPWA reserves the right to make changes to some or all of the information displayed here without notice. 

The need for a financial advisor or financial planner and/or the type of services required are specific to the uniqueness of each individual’s circumstances. The referenced material identified herein is limited in nature and specific to what is offered by EPWA. There is no guarantee or warranty that the services offered by EPWA will satisfy your financial services requirements. Services offered by other advisors may be more suitable to your specific needs. 

All investment strategies have the potential for profit or loss. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio. The risk of loss can never be eliminated even if working with a professional.

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