The SECURE Act. 2.0 - 6 Things You Need to Know

Marlene Badai |
Categories
Finance
Retirement
Saving
SECURE Act 2.0

At the end of last year, Congress passed new rules concerning many strategies regarding your savings. The SECURE Act 2.0 is now law. What does this mean for you and your current or potential savings?

Here are 6 key takeaways:

For Those Currently Saving:

1. A Roth held in a 401(k) beginning in 2024 will no longer be subject to Required Minimum Distributions. So, in addition to the benefit of after-tax savings and not creating taxable income when you take distributions, you will not be required to take distributions at a specific age. This gives you more flexibility and options in later years. 

2. Also, prior to 2023, if your employer made matching contributions, it would be matched into a traditional account. Employers can now make the contribution into a Roth. This creates more tax-free retirement dollars for you.

3. Employers of small businesses (fewer than 100 employees) may offer a Savings Incentive Match Plan for Employees (SIMPLE) IRA. In addition, beginning this year, SIMPLE IRAs can also offer a Roth option. Talk to your employer about this opportunity to build savings that will be 100% tax-free in retirement. 

4. Starting in 2024, employers can ‘match’ employee student loan payments with matching payments to a retirement account. If you have an employer plan that offers this feature and a student loan, this gives you even more opportunity to save while paying off educational loans.

For Those Closer to Retirement:

5. The catch-up contributions have also increased considerably for those closer to retirement. For example, beginning in 2025, if you are between 60-63, your catch-up can be $10,000, which will be indexed to rise with inflation. Depending on your income, this may need to be into a Roth 401(k), creating more potentially tax-free retirement dollars for you.

6. Required Minimum Distributions (RMDs) increase to age 73 in 2023 and 75 in 2033. This allows those who can ‘wait on income’ the opportunity to do so.

SECURE 2.0 increases opportunities to save, and everyone’s financial situation is unique. As always, consult your financial advisor or tax professional. Give RoZel Financial a call today to understand how SECURE 2.0 changes apply to you!