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SECURE 2.0 Act: Five Takeaways

January 24, 2023

Recently passed into law, the “SECURE 2.0 Act” is designed to encourage investors to save more (and longer) for retirement. Here are five takeaways from the SECURE 2.0 Act that we identify as most notable:

1. Enhancements to Retirement Savings
  • The required minimum distribution (RMD) age will increase to 73 beginning in 2023. The age will increase again to 75 by 2033. Anyone turning 72 this year will not be required to take an RMD.
  • Catch-up contribution limitations are now adjusted for inflation.
2. Roth IRA Tax Treatment is More Entrenched Than Ever
  • Employer contributions to retirement plans can be Roth IRA contributions.
  • Lifetime RMDs are no longer required from employer plan Roth IRA accounts.
  • Roth Simple and Simple Employee Pension (SEP) IRA options have been added.
3. Significant Expansion of Startup Credits Could Make This the Time to Set Up a Small Business Plan
  • A retirement plan startup cost tax credit of up to $5,000 for three years is now available to help employers offset the costs of setting up a SEP IRA, Simple IRA, or qualified plan.
4. More Tools for Tax Efficient Giving
  • The 529 to Roth IRA rollover option: Starting in 2024, a 529 plan asset can be rolled into Roth IRAs with the same beneficiary. There are limitations:
    • The 529 account must be at least 15 years old, having had the same beneficiary during that period.
    • The amount to be rolled over must have been in account for at least five years.
    • The Roth IRA must be in the name of the 529 plan beneficiary.
    • Contributions must be within annual contribution limits ($6,500) and limited to a maximum of $35,000 per beneficiary over their lifetime.
    • Income limitations do not apply for 529 to Roth IRA rollovers.
  • An expansion of qualified charitable distributions (QCDs):
    • The annual $100,000 exclusion limit for QCDs will be indexed for inflation starting in 2024.
5. Proposed Legislation NOT Included in the SECURE 2.0 Act:
  • Eliminating or altering Roth IRA conversions
  • Backdoor Roth IRA contributions
  • Age at which the QCDs begin (it is still age 70.5)
  • The type of investments allowed to be purchased in retirement accounts
  • The “10-year rule” for inherited IRAs

Please see a detailed guide to Secure 2.0, click here for more information.

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