How does the SECURE Act 2.0 impact my retirement?
Discover how the SECURE Act 2.0 impacts your retirement. Or, if you want to speak directly to a financial advisor, simply answer a few questions below, and we will connect you to a single advisor best suited to meet your needs.
Summary
The SECURE Act 2.0 is a significant piece of legislation aimed at encouraging more workers to save for retirement.
The new changes are coming into effect over several years, from 2023 to 2027, with each year bringing a wave of new rules savers must abide by.
Some of the new legislation impacts automatic retirement plan enrolment, required minimum distributions (RMDs), emergency distribution allowances, and catch-up contributions.
Unbiased can match you with a financial advisor who can help you take advantage of the new SECURE Act 2.0 initiatives and achieve your dream retirement.
What is the SECURE Act 2.0?
The SECURE Act 2.0, also known as the “Setting Every Community Up for Retirement” Act, was passed in late 2022 and is a significant piece of legislation aimed at encouraging more workers to save for retirement.
The act introduced several changes, including to automatic retirement plan enrolment and emergency distribution allowances, to encourage employees to save to their employers’ 401(k) or 403(b) plans.
The act is a continuation of the original SECURE Act 2019, which changed the way people save for retirement, so it is aptly named 2.0.
How does the SECURE Act 2.0 affect your retirement?
The SECURE Act 2.0 introduces a number of impactful changes to the rules around saving for retirement.
These changes are coming into effect over a number of years, from 2023 to 2027, with each year bringing a wave of new rules savers must abide by.
As it stands, here are some of the changes you currently need to be aware of:
The RMD age has increased to 73. It will increase again to 75 by 2033.
The penalty for not taking RMDs drops from 50% to 25%. If the error is corrected in time, it drops to 10%.
Employers can offer a small incentive, such as a low-cost gift, to increase employee participation in workplace retirement plans.
Employers will now be able to provide employees with the option of receiving vested matching contributions to Roth accounts, i.e. the money is owned by the employee and cannot be taken away if the employee does not meet a set number of years' service with the company.
Those aged 70 and a half or older can give a one-time gift of up to $50,000 of their $100,000 qualified charitable distribution (QCD) from their IRA to a charitable remainder unitrust (CRUT), a charitable remainder annuity trust (CRAT), or a charitable gift annuity (CGA). This distribution will be excluded from their taxable income.
However, multiple additional big changes have come into effect in 2024, with more to come in the following years.
What are the SECURE Act 2.0 2024 changes?
Throughout 2024, a number of additional changes will come into effect that will directly impact the way people save for retirement and withdraw their retirement income.
Some of these changes include:
Certain RMDs eliminated
Beginning in 2024, RMDs for qualified employer Roth 401(k) plans will be eliminated.
This does not apply to accounts where the original account holder is deceased. Post-death minimum distribution rules still apply.
Emergency distribution allowance
From the start of 2024 onwards, individuals are permitted to take an early “emergency” distribution of up to $1,000 to cover unforeseeable or immediate financial needs.
This distribution is not subject to the usual additional 10% early withdrawal tax; however, it is only permitted once a year and needs to be repaid within a certain timeframe.
Student loan match
Your employer can now make a matching contribution to your retirement account based on how much you repay in student loans. This initiative is aimed at helping those with high student loan debt to save for retirement.
529 plan rollover
A 529 plan is a tax-advantaged account that lets you save and contribute towards future educational costs. Traditionally, if money within this plan went unused, it remained in the plan account and could not be transferred.
Subject to meeting a number of conditions, such as holding the account for 15 years and both the 529 plan and IRA being held in the same name, some 529 plan owners can rollover their funds from their plan into their Roth IRA.
What changes are being made to the SECURE Act 2.0 in 2025?
There are also a number of changes coming into effect in 2025, including:
The ability to increase catch-up contributions
Starting on January 1, 2025, those aged between 60 and 63 will be able to increase their catch-up contributions to retirement plans such as 401(k)s to the greater of $10,000 or 50% more than the regular catch-up amount. After 2025, these amounts will be indexed for inflation.
Expanded automatic enrollment
In 2025, employers must also automatically enroll eligible employees into a new 401(k) and 403(b) retirement plan that was established after SECURE 2.0 became law. The default contribution rate is between 3% and 10% of their salary unless the employee selects an alternative rate.
RMDs on inherited IRAs
Beginning in 2025, non-spouse beneficiaries of an IRA will incur a 25% penalty for not taking the RMD. As per the IRS, inherited IRAs to non-spouses must be completely withdrawn 10 years after the date of the decedent’s death.
What other changes can I expect from the SECURE Act 2.0?
As the changes of the SECURE Act 2.0 have been staggered over a number of years, substantial changes will still come into force in 2026 and 2027.
These include:
Further changes to catch-up contributions
Catch-up contributions to workplace retirement plans must go into a Roth account and be made on an after-tax basis beginning in 2026. Those who earn less than $145,000 are exempt.
New “Saver’s Match”
Starting in 2027, the “Saver’s Credit,” which cuts $1,000 off the tax bill of lower and middle-income Americans who contribute to a retirement plan, will be replaced by the new “Saver’s Match.” This is a federal matching contribution, either 50% of your contributions or $2,000, that will be deposited into your IRA or retirement plan.
How do I plan for retirement following the SECURE Act 2.0?
Planning for retirement can often feel overwhelming, especially when new regulations are constantly coming into effect.
To plan properly and ensure you’re getting the most out of your money while also adhering to all the rules surrounding your retirement, it’s best to work with a professional.
A financial advisor knows all the ins and outs of retirement planning and can provide you with a personalized plan that will help you reach your goals.
Simply answer a few questions about your requirements, and Unbiased can quickly match you with an SEC-regulated financial advisor. Your first consultation is completely free, and you have no obligation to proceed.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.