What SECURE 2.0 means for your clients – InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading From The Field Exclusive News
Topics
    • Life Insurance News
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Articles
    • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
Sign in or register to be an INNsider.
  • Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
  • Insider Pro
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
From The Field Exclusive News
From The Field Exclusive News RSS Get our newsletter
Order Prints
January 5, 2023 From The Field Exclusive News No comments
Share
Share
Tweet
Email

What SECURE 2.0 means for your clients

By Komal Motwani

SECURE 2.0 was signed into law on Dec. 29. What does it mean for your clients? Here are a few highlights.

Komal Motwani

Required minimum distributions. The original SECURE Act, which became law in 2019, raised the required minimum distribution age from 70 ½ to 72 years. The SECURE 2.0, effective Jan. 1, further increased the first year RMD age to 73 years. Your clients turning 72 in 2023 will now have to take their first year RMD in 2024, although for their first year RMD they will have until the April 1, 2025, to satisfy the requirements. With this caveat: If they choose to wait and take their first year RMD in the following year – 2025 - now they must take two RMDs in 2025, the second one by Dec. 31, 2025.The law further required the RMD age to increase again, to 75 years in 2033.

Currently, if a client fails to take RMDs in a timely manner, then the RMD amount not distributed is subject to 50% penalty. Beginning in 2023, this excise duty will be lowered to 25% and potentially could be further reduced to 10% if corrected in an appropriate timeframe.

Related stories

  • The added perks of boosting workplace benefits
  • How captive insurance can save high net worth clients’ hard-earned money

Another beneficial attribute included in the SECURE 2.0 is that starting in 2024, participants will be exempt from taking RMDs from their Roth employer-sponsored plans.

Increased catch-up contributions and indexing IRA catch-up contributions. In 2022, clients ages 50 and older were able to add another $6,500 to their employer-sponsored retirement plans, and SIMPLE IRA and SIMPLE 401(k)s were permitted $3,000 annual catch-up contributions. The new law now permits clients to add the greater of $10,000 ($5,000 for SIMPLE Plans) or 150% of current regular catch-up contribution in 2025 for clients who have attained age 60, 61, 62, 63 in 2025. The increased amounts are indexed for inflation after 2025.

In addition, beginning in 2024, catch-up contributions must be made on a Roth basis for the participants who were paid compensation of $145,000 or more in the prior year (indexed for inflation).

Also starting in 2024, the IRA catch-up contribution ($1,000) for those 50 years and older will be indexed for inflation.

529-Roth IRA transfers. Section 529 plans are earmarked for college expenses. Beginning in 2024, 520 beneficiaries can roll over up to a $35,000 lifetime cap into their Roth IRAs. The rollovers are subject to annual IRA contribution limits and the 529 accounts must have been opened for more than 15 years.

Auto enrollment. Beginning in 2025, employers are required to auto enroll eligible employees to the new 401(k) or 403(b) plans. The initial automatic enrollment rate is 3% but not exceeding 10% with an annual increase of 1% thereafter until it reaches 10% or maximum up to 15%.

SIMPLE and SEP Roth IRAs. Starting 2023, SIMPLE plans can accept employee Roth contributions. In addition, the employers of SEP plans can allow employees to treat the SEP contribution as Roth contributions.

Employer matching Roth contributions. The participants can receive matching Roth contributions in their employer-sponsored plan. This goes into effect in 2023.

Matching contributions for student loan payments. SECURE 2.0 permits employers to make matching qualified student loan repayments contributions under a 401(k), 403(k) and some 457(b) plans. It states that an employer can choose to make contribution to an employee account matching to the student loan payment as if the employee had contributed to the plan instead. This new rule goes into effect in 2024.

Emergency withdrawals from 401(k) and IRAs. Generally, withdrawals from a 401(k) or IRA before age 59 ½ can be subject to 10% penalty and taxes. SECURE 2.0 specifies emergency expenses for any unforeseeable or immediate expenses up to $1,000 (per year) can be withdrawn from the retirement accounts without paying 10% penalty. Taxes will still be owed on these distributions. There are other nuances to this rule.

 

Komal Motwani, CFP, is a senior investment analyst at Yanni & Associates Investment Advisors, a Pennsylvania-based registered investment advisor. She may be contacted at [email protected].

© Entire contents copyright 2023 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

 

 

 

Older

Study finds Gen Z plans to retire earlier than preceding generations

Newer

James Lee becomes 2023 FPA president

Advisor News

  • 12 ways SECURE 2.0 can benefit your clients
  • Republicans, Joe Manchin set sights on tanking Biden's climate friendly 401(k) rules
  • For agents and advisors, dispelling LTCI myths is crucial to building sales
  • Several major changes with Social Security expected to come in 2023
  • Some major REITs limiting cash-out requests from investors
More Advisor News

Annuity News

  • Sweet streams of income: ChatGPT, the bard of annuities
  • F&G Annuities & Life announces equity investment in life IMO SYNCIS
  • Investors scrambling to lock in rates propel annuity sales to record highs
  • North American and Annexus launch new fixed index annuity
  • Producers stew as insurers slow to process life and annuity applications
Sponsor
More Annuity News

Health/Employee Benefits News

  • Ohio physician pleads guilty to illegally prescribing opiods, healthcare fraud
  • Affordable Care Act's no-cost contraception rule would be bolstered under Biden move
  • Medicare Advantage open enrollment is happening now
  • Medicaid coverage is expiring for millions of Americans – but there's a proven way to keep many of them insured
  • Health savings account balances increase in 2021
More Health/Employee Benefits News

Life Insurance News

  • House approves bill protecting life insurance payouts from bankruptcy
  • NAIFA’s Future Leaders Program offers free sessions for students
  • Scott Boutin named president of Standard Security Life
  • Agent insists Alex Murdaugh suggested he killed his son
  • 78% of families suffer financially handling estate affairs
More Life Insurance News
The time is 07:02:20pm test

- Presented By -

Top Read Stories

  • Investors scrambling to lock in rates propel annuity sales to record highs
  • Chicago news roundup: PPP fraud uncovered in Chicago, informant reveals $100K bounty on FBG Duck and more
  • For some, nothing to fear from taking RMDs, professor says
  • Study: Education level should drive decisions on Social Security, annuities
  • Maine man sentenced to 33 months for fraudulently receiving PPP funds
More Top Read Stories >

FEATURED OFFERS

Meet Encova Life
We know agents matter. You can count on our life team to be high tech, high touch and responsive.

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Articles
  • Monthly Focus

Top Sections

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2023 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • AdvisorNews

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.