What Do I Need To Know About Secure 2.0 Act?

The primary purpose of the Secure 2.0 Act is to encourage workers in the US to save for retirement.  In 2023, excluding Social Security, American adults between the ages of 32 and 61 had average retirement savings of under $130,000.  Almost 40% of American adults had no retirement savings at all.  Many investment advisors recommend saving a minimum of 15% of income for retirement. 

The major changes to retirement savings include:

1.  Required Minimum Distribution (RMD) Age - Changed from 72 to 73 for participants born on or after January 1, 1951 and age 75 for participants born on or after January 1, 1959.  This means that if you have a retirement account that is not a Roth account, you have a longer time before you are required to distribute funds out of your retirement account (and pay tax on the withdrawals). 

2.  RMDs and Roth 401(k)s – Eliminates RMDs for qualified employer Roth 401(k) plan accounts.  Non-401(k) Roth accounts were not subject to RMDs.

3.  401(k) Hardship Withdrawal – Allows early distributions to cover unforeseeable or immediate financial needs up to $1,000 per year (if not paid back timely, distribution allowed only every three years).  These amounts are not subject to the 10% penalty that applies to early distributions.

4.  401(k) Automatic Enrollment – In 2025, except for small business, companies will be required to automatically enroll employees in 401(k) and 403(b) plans.  Employees will be required to opt out of participation if they do not want to contribute to a plan.

5.  401(k) Contribution Limit – In 2025, the catch-up contributions for those 50 or older is increased to the greater of $10,000 or 50% more than the regular catch up amount for ages 60-63.  After 2025, the amounts will be indexed for inflation.

6.  Roth Catchup Contributions In 2026, those 50 years old and older earning $145,000 or more in the previous year will only be permitted to make extra contributions using a Roth account (after-tax money).

7.  Student Loan Match – Employers can make a matching contribution to retirement plans based upon an employee’s student loan payment amount.

8.  529 Account Rollover to Roth IRA – Qualifying individuals may roll over a 529 plan that they have maintained for at least 15 years to a Roth IRA in the name of the beneficiary of the 529 plan.  Annual limits for the rollover are limited to the annual contribution limit and there is a $35,000 lifetime limit on rollover from 529 account to Roth IRA.

Need help sorting through the Secure 2.0 Act? Give Lubnau Law a call at (307) 682- 1313.

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