SECURE Act 2.0: Key Changes and Impacts on Retirement Planning

The SECURE Act 2.0 introduced several significant changes aimed at improving retirement savings and access for workers. Whether you’re nearing retirement or early in your career, these updates are important for optimizing your retirement strategy. Below are some of the key changes and how they impact retirement planning.

1. Required Minimum Distributions (RMDs)

One of the biggest changes under SECURE Act 2.0 is the increase in the age for required minimum distributions. Originally raised to 72 under the first SECURE Act, the RMD age increased to 73 starting in 2023, and it will rise to 75 by 2033. This gives retirees more time to let their investments grow before tapping into them.

2. Auto-Enrollment and Auto-Escalation in Retirement Plans

Starting in 2025, new 401(k) and 403(b) plans will be required to auto-enroll employees at a minimum contribution rate of 3%, which will increase annually by 1% until it reaches at least 10%. Employees can opt out, but this change encourages early and consistent retirement savings.

3. Catch-Up Contributions for Older Workers

For those aged 60 to 63, catch-up contribution limits will increase significantly in 2025. This will help those approaching retirement make larger contributions, up to $10,000 or 50% more than the standard catch-up amount for 2024. Additionally, high earners (making over $145,000 annually) will be required to make catch-up contributions to a Roth account starting in 2024.

4. Roth Contributions and Employer Matching

Another important update allows employers to offer Roth matching contributions for 401(k) and 403(b) plans, which will be taxed as income when made. Employees can also choose to treat contributions to SIMPLE and SEP IRAs as Roth, offering more flexibility in tax planning.

5. Student Loan Repayment Match

Beginning in 2024, employers can make matching contributions to a retirement plan for employees who are repaying student loans, even if those employees are not contributing directly to the plan. This is a big win for those burdened with student debt but still wanting to save for retirement.

6. Emergency Savings

Starting in 2024, retirement plans can offer linked emergency savings accounts. These accounts allow non-highly compensated employees to save up to $2,500 after-tax, with penalty-free withdrawals allowed, providing a cushion for unexpected expenses.

7. Retirement Plan Eligibility for Part-Time Workers

By 2025, part-time employees who work at least 500 hours annually for two consecutive years (down from three years) will be eligible to participate in their employer’s 401(k) plan. This change improves access to retirement savings for more workers.

8. 529 Plan to Roth IRA Transfers

Starting in 2024, unused funds from a 529 college savings plan can be rolled over to a Roth IRA for the beneficiary, up to a lifetime limit of $35,000. This provision offers a tax-free way to repurpose unused education savings for retirement.

Need help navigating these changes? At 4Wealth Financial Group, we can guide you through the nuances of SECURE Act 2.0 and help you make the most of these new opportunities. Contact us today to discuss how these updates could impact your retirement plan.