SECURE Act 2.0: What Every Individual Needs to Know

You may have read about the SECURE Act 2.0 that passed in late December as part of the Consolidated Appropriations Act.  This is the most extensive retirement plan legislation we have seen in years.  The main objectives include increase the availability of retirement plans, help people save more, streamline retirement plan rules, and help individuals preserve income in retirement.  The SECURE Act 2.0 has a plethora of provisions, some major and some minor; some mandatory and some optional; some retroactively effective and some won’t be effective for years to come. And some with unanswered questions. Below are the provisions we believe to be the most impactful and it’s now time to begin planning.  However, there is a lot more guidance we need from the IRS and Department of Labor before we can fully give analysis of the nearly 90 provisions and how they may impact you as an individual investor on a day-to-day basis.  If you are a participant in an employer sponsored plan, guidance from record keepers and plan administrators is also required on how several provisions will be implemented. Now it’s time to begin planning for provisions currently effective along with those slated for the coming years.  Our list of the most impactful provisions listed by effective date is as follows.

Effective Immediately - 2023

     • New exclusions to the 10% early withdrawal penalty - qualified disaster, qualified birth or adoption and terminally ill      • Employee may self-certify hardships      • Employers may permit Roth match      • Required Minimum Distributions (RMD) bumped to Age 73      • Simple and SEP Roth contributions allowed

Effective 2024

     • Tax & Penalty Free Rollovers from 529 to Roth IRA - capped at $35,000 and account must be opened for 15 years.      • If earning > $145k, catch up contributions must be Roth (Note: a significant technical error in bill, if not fixed, would         eliminate the ability for 401(k) participants to make catch-up contributions in 2024. Treasury Department have been altered)      • IRA catch-up of $1,000 begins to index with inflation      • Employer may match student loan payments      • No RMD for Roth 401(k) and 403(b)      • Retirement Savings Lost and Found      • New exclusions to 10% early withdrawal penalty - Emergency Distribution of $1,000 AND Domestic Abuse

Effective 2025

     • Catch up contributions increased for savers ages 60-63

Effective 2026

     • New exclusions to 10% early withdrawal penalty - Qualifying Long Term Care Insurance Premiums

Effective 2027

     • Refundable Savers Credit - max of $2,000 for low-income savers. Credit deposited into retirement savings.

Effective 2033

     • RMDs bumped to Age 75 We continue analyzing the provisions and will share comments as guidance is received. In the meantime, please reach out if you have questions.

The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that Rose Street Advisors is not engaged in rendering tax, legal, or actuarial services. If tax, legal, or actuarial advice is required, you should consult your accountant, attorney, or actuary.

Rose Street Advisors does not replace those advisors. 

Securities and Investment Advisory Services Offered Through M Holdings Securities, Inc. A Registered Broker/Dealer and Investment Adviser, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. File #: 5442889.1