How to enhance your client’s retirement plan through the SECURE 2.0 Act
The newly-enacted SECURE 2.0 Act contains significant changes that may affect how you plan for retirement. The bill, passed by
Here are some of the key provisions included in the new law, which are being phased in over the next several years:
NEW RULES NOW IN EFFECT. Required minimum distributions (RMDs) start after age 73. Until recently, RMDs from traditional IRAs and workplace retirement savings plans, such as 401(k) or 403(b) accounts, had to begin after reaching age 72. Now individuals can wait until reaching age 73, extending the benefit of tax-deferred growth of earnings. Distributions must commence by
NEW RULES IN EFFECT IN 2024. Matching contributions for those paying student loans. Employers will have the ability to offer contributions to workplace retirement savings plans that match the amount of student loan debt repaid by an individual employee in a given year.
Rollovers of 529 education savings plan balances to
This provision may alleviate a parent's potential concern that they are over-funding a 529 plan. For example, if a child qualifies for scholarships, or school expenses are less than anticipated, leftover 529 amounts could be transferred to the beneficiary's Roth IRA.
Requires catch-up contributions to be made as Roth contributions using after-tax dollars. Catch-up contributions for participants aged 50 or older must be made on a Roth basis under 401(k), 403(b), and governmental 457(b) plans. However, the requirement applies only if the employee's prior-year wages from the employer sponsoring the plan exceed
No RMDs for Roth workplace plans. Under current law, those with Roth 401(k)s or Roth 403(b) plans are subject to the same required distribution rules as standard workplace plans. However, the new law will eliminate RMDs for workplace-based Roth savings plans, comparable to current rules for
Emergency savings. New emergency savings accounts, associated with an employer's retirement plan, can be established for many employees. It will allow them to accumulate up to
OTHER KEY CHANGES BEYOND 2024. Other provisions of the SECURE 2.0 Act that will take effect in 2025 include:
The ability of workers ages 60 to 63 to make catch-up contributions
of
A requirement that
employers with 401(k) or
403(b) plans automatically enroll eligible employees in a workplace
savings plan, starting at
a contribution rate of
at least three percent
(workers can choose to
opt out of the plan).
The ability of part-time
workers to participate
in a workplace retirement plan once they've
worked at least 500
hours for two consecutive years, rather than
the current three-year
threshold.
What does it mean for you? How can these changes enhance your own retirement savings plan? It may be beneficial to talk to your financial advisor to determine how you might be able to leverage the new rules listed here and others to help secure your retirement savings plan. Submitted by
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