A look at the Secure Act 2.0
With all of the fanfare associated with the big climate bill, (the Inflation Reduction Act or "IRA"), you may have missed potential changes coming to the original IRA.
When they return from summer break, lawmakers will get busy on the 2022 addendum to the
That law made big changes to retirement plans, like increasing the age at which you are required to withdraw money from tax-deferred retirement accounts (the Required Minimum Distribution age is 72 as of
Lawmakers are now seeking to beef up the SECURE Act with additional measures.
While the
Currently, those over 50 years old can contribute an extra
Additionally, both would require that any catch-up contributions for those over age 50 be made as Roth contributions, and would allow employees to have employer matching contributions made as Roth contributions.
For IRA catch-up contributions, currently at
When it comes to taking money out of a pre-tax retirement plan, both versions would delay the first RMD year to age 75, though the House bill phases in the change, while the
Thankfully, both bills would ease the burden for those who do not take their RMDs - the penalty would drop from 50% to 25%, and if the error is corrected in a timely manner, it would be 10%.
For those retirees who are using Qualified Charitable Distributions, which allow direct grants of up to
To increase participation in retirement plans for current workers, the House version would automatically enroll participants into company-sponsored retirement plans, starting at 3% of salary, and gradually increasing that amount to 10%.
Small (fewer than 10 employees) and newly formed companies (less than 3 years old) would be excluded. While the
Both plans would also make it easier for part-time workers to become eligible for their company's 401(k) and would extend the "Saver's Credit," a federal tax credit for mid- and low-income taxpayers who contribute to an IRA or company plan.
I'll keep an eye on the process and report back when a final deal is complete.
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