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SECURE Act 2.0 - What Is Included?

Congress recently passed the SECURE Act 2.0 with the intention of incentivizing Americans to save more for retirement. This new legislation will have immediate and significant implications to retirement planning. It went into effect on January 1, 2023

The legislation is extensive and far reaching with many nuances. Below is a summary of several important changes that could impact you:

  • Increased RMD Age: Plan participants and traditional IRA owners were most recently required to start withdrawing a minimum amount from their retirement savings in the year they reached age 72. The new rule has increased required minimum distribution to age 73, allowing participants more time to enjoy tax-deferred compounding savings. Staring in 2033, the RMD age will be increased to 75.

  • Rollover Of Excess 529 Assets To Roth IRAs: Beginning in 2024, excess assets in a 529 qualified tuition program will be eligible for a tax-free rollover to a Roth IRA. The beneficiary of the 529 account and the Roth IRA must be the same, and the 529 account of the beneficiary must have been maintained for at least 15 years. The rollover will be subject to certain limits and qualifications. The rollovers will also be subject to a per-beneficiary lifetime limit of $35,000. This provision is aimed at supporting savers who have been making contributions to a 529 plan in lieu of saving for their own retirement.

  • "Lost and Found" National Database: The Secure Act 2.0 includes the establishment of a retirement savings “lost and found,” a national online searchable database that will be established at the Department of Labor (DOL). The database will enable retirement savers who might have lost track of their pension or 401(k) plan, to search for the contact information of their plan administrator.

  • Self-Correction of IRA Violations: Effective immediately, all inadvertent plan violations may be self-corrected under the IRS’ Employee Plans Compliance Resolution System (EPCRS) without a submission to the IRS. An example of an inadvertent plan violation could be if someone fails to take their RMD in a timely manner.

  • High Catch-Up Contribution Limits: Those ages 60, 61, 62 and 63 will be eligible for a higher catch-up contribution limit beginning in 2025. Current law limits catch-up contributions to $7,500 (except for SIMPLE plans, which limit to $3,500). Under SECURE 2.0, effective in 2025, individuals will be able to contribute the greater of $10,000 (indexed) or 150% of the regular catch-up. For SIMPLE plans, individuals will be able to contribute the greater of $5,000 or 150% of the regular SIMPLE catch-up.

To learn more about this new and important legislation, we encourage you to read LPL's Top 10 Provisions in Secure 2.0.

Our team is closely following the new legislation and we will be incorporating these changes into our planning conversations with our clients and stakeholders.

If you have specific questions or would like to discuss your own investment strategy or financial planning needs, we welcome you to call us at 302.234.5655 or email us at contactus@covenantwealthstrategies.com to set up time to discuss further.

Disclosures:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor.