02.05.2024 By Carolyn Pemberton

What Does Secure 2.0 Mean for me and my Retirement Journey?

Legislation passed at the end of 2022 has several important changes to retirement security policy that impacts retirement savings. Whether you are already retired, close to retirement or years away, it’s likely that the legislation, known as SECURE 2.0, contains some provision that will impact your saving for retirement.

Legislation passed at the end of 2022 has several important changes to retirement security policy that impacts retirement savings. Whether you are already retired, close to retirement or years away, it’s likely that the legislation, known as SECURE 2.0, contains some provision that will impact your saving for retirement.

We’ll provide a broad overview here of the major provisions and from there you can seek out additional information from a financial professional or from your employer’s employee benefit staff.

So, let’s dive in. The highlights include:
  • Increasing the age at which retirees must begin taking Required Minimum Distributions (RMDs) from IRA and 401(k) accounts.
  • Changes to the amount of catch-up contributions for older workers participating in a workplace retirement savings plan.
  • Changes designed to help younger people continue saving for retirement while paying off student loan debt.
  • Making it easier to move savings from one employer account to another employer account upon job changes.
  • Enabling people to save for emergencies within retirement accounts.

Now let’s take a closer look at some of the provisions.

  • Changes to RMDs.
    • Starting January 1, 2023, the age at which owners of retirement accounts must start taking RMDs will increase to 73 from the current age of 72 and again to age 75 starting in 2033. RMDs basically require account owners to take a mandatory withdrawal of deferred savings from their retirement accounts. America Saves suggests you get professional tax advice for how this change may impact your situation.
    • Also starting in 2023, the penalty for failing to take an RMD will decrease from the current 50% of the RMD amount not taken to 25%. Additionally, Roth accounts that are part of an employer plan will be exempt from the RMD requirements beginning in 2024.
  • Catch-Up Contributions:
    • Beginning January 1, 2025, workers aged 60 through 63 will be able to make catch up contributions up to $10,000 annually into their workplace plan, indexed to inflation.  There are additional provisions for higher income earners that you may want to ask your benefits department about.
    • The $1,000 catch up contribution limit for IRAs will be indexed to inflation beginning in 2024.
  • Student Loan Debt:
    • Starting in 2024, employers will be able to match employee student loan payments with matching payments to a retirement account, giving these workers to ability to save for retirement while paying off educational loans. This may be particularly helpful if you are early in your career earning an entry level salary and are trying to meet competing saving priorities.
  • Retirement Plan Portability:
    • A new provision allows for the automatic transfer of worker’s account valued at under $5,000 into a new employer’s retirement plan unless the participant chooses otherwise. This can help you consolidate retirement accounts from various employers upon job changes and help prevent you from losing track of retirement savings from previous jobs.
  • Emergency Savings:
    • Beginning in 2024 employers offering a defined contribution retirement place would be able to add an emergency savings account allowing after-tax contributions of up to $2,500 annually. Employees must be able to make at least one withdrawal per month and not incur any penalty on the first four withdrawals made in a year. Employers may also decide to offer another type of emergency savings benefit not connected to a retirement plan.

 

 

As a complement to all of this technical information, you may want to check out these episodes from the America Saves ThinkLikeASaver Podcast – about saving for life’s major milestones and how emotions affect our money habits. Combining resources from America Saves, your employer, your financial institution, government agencies, local nonprofits, can help you decide what is the next best step for you as it relates to these provisions in the SECURE 2.0 legislation. 

 

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