On December 29, 2022, the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act was signed into law as part of the Consolidated Appropriations Act of 2023. The new law builds on the original SECURE Act enacted three years prior that famously moved the Required Minimum Distribution (RMD) age out to age 72, among other changes.
SECURE 2.0 takes it to a whole new level with nearly 400 pages of rule changes that provide some favorable planning opportunities but doesn’t do much to simplify retirement account rules. Some provisions take effect immediately while others have future start dates. While there are too many changes to list, here are a few of the highlights:
The age to begin taking RMDs is moving out
Previously, when you turned 72 you were required to take a minimum amount of money out of your Traditional IRA or 401k account to trigger a tax bill for Uncle Sam. Starting in 2023, that age moves out to 73. In 2033 the age to begin taking RMDs is pushed out again to age 75 for individuals born in 1960 or later. The delay in starting RMDs could keep income related Medicare payments at bay and allow more opportunities for Roth conversions.
Employers will be able to match student loan payments
Many recent graduates struggle to make 401k contributions while they’re staring down huge student loan debt. With amendments to their 401k plans, employers can match the amount that participants pay toward their student loans starting in 2024.
Surviving Spouses have another choice for inherited IRA accounts
Starting in 2024, surviving spouses will have yet another choice for the treatment of an IRA account they inherit from their spouse. Expanding the list of already available options (i.e., rolling the decedent’s IRA into your own, electing to treat the decedent’s IRA as your own and remaining a beneficiary of the decedent’s IRA) you can elect to be treated as the deceased spouse. This option could delay RMDs until the deceased spouse would have reached the age at which RMDs would begin.
529 plan to Roth transfers could begin in 2024
With considerable limitations and restrictions, starting next year, it becomes possible to transfer unused 529 plan money into a Roth account. This allows money that was earmarked for educational purposes to be repurposed as retirement savings in the event those funds are not needed for education after all. To qualify, the 529 Plan must be maintained for at least 15 years, transfers are limited by the IRA contribution limit every year, less any regular IRA contributions and there’s a $35,000 lifetime limit. However, with careful planning this could help “prime the retirement pump” for children, grandchildren, and other loved ones.
There are lots of rule changes with SECURE 2.0, and we don’t expect you to become experts; that’s our job. If you want to learn more, just reach out to any one of us at ZRC Wealth Management. We’ll be happy to explore the rule changes with you. For our 2023 Tax Guide click here.
The information provided here is for general informational purposes only and should not be considered investment advice. ZRC does not provide tax advice. Clients should consult a professional tax advisor for their tax advice needs.
