SECURE 2.0: What it Means for Your Retirement
The SECURE 2.0 Act introduces a broad set of updates designed to improve the retirement landscape in the U.S. Building on the foundation of the original SECURE Act passed in 2019, this new legislation aims to expand access to retirement savings plans, delay mandatory withdrawals, and provide more flexibility for workers across age groups and income levels.
The reforms aim to help Americans prepare for retirement. This is true for those just starting to save or those already using their savings. Here are the key changes from SECURE 2.0. We will look at those near retirement and those a few years away.
For Those Approaching or in Retirement
1. Enhanced Catch-Up Contributions
Beginning in 2025, individuals aged 60 to 63 will be able to contribute more to their workplace retirement accounts. The new limit rises to $11,250, significantly higher than the standard catch-up limit of $7,500 (as of 2025). However, starting in 2026, higher earners—those making over $145,000—must make these catch-up contributions to Roth (after-tax) accounts.
Traditional IRAs also get a small but meaningful upgrade: the $1,000 catch-up contribution limit for those 50 and older will now be indexed to inflation, allowing for potential increases in future years.
2. Required Minimum Distribution (RMD) Changes
One of the headline changes of SECURE 2.0 is the increase in the RMD starting age. As of 2023, the age was raised from 72 to 73, and it will rise again to 75 starting in 2033. This gives retirees more flexibility to let their investments grow before being required to draw from them.
Additionally, the penalty for failing to take an RMD has been cut from 50% to 25%. That drops even further—to just 10%—if the oversight is corrected promptly through a revised tax return within two years.
Another welcome change: Roth accounts in employer-sponsored retirement plans will no longer be subject to RMDs starting in 2024, aligning them with Roth IRAs.
3. Employer Matching on Roth Contributions
Employers now have the option to offer matching contributions into Roth retirement accounts. This is a shift from the traditional pre-tax matching model and allows employees to build a source of tax-free income in retirement. While it may take time for payroll systems to support this option, it represents a meaningful change in how workplace plans can function.
4. Charitable Giving Through IRAs
Starting in 2024, individuals age 70½ or older may make a one-time qualified charitable distribution (QCD) of up to $54,000 (adjusted annually) to certain types of charitable trusts or gift annuities. This donation counts toward the annual QCD limit and can help satisfy RMD requirements.
5. Longevity Annuities Get a Boost
Qualified longevity annuity contracts (QLACs), which allow retirees to defer income payments until later in retirement, also see favorable changes. The maximum premium jumps to $210,000 in 2025, and the previous rule limiting contributions to 25% of the account balance has been removed.
For Younger Savers and Workers
6. Automatic Enrollment and Portability
Starting in 2025, newly created 401(k) and 403(b) plans must automatically enroll eligible employees at a minimum 3% contribution rate. SECURE 2.0 also encourages easier transfer of low-balance accounts when workers switch jobs, reducing the odds of workers cashing out early.
7. Emergency Savings Inside Retirement Plans
Plans may now offer an emergency savings option as part of Roth accounts. Employees earning below a certain threshold can contribute up to $2,500 annually, with the first four withdrawals each year penalty- and tax-free.
8. Student Loan Matching Contributions
As of 2024, employers can treat student loan payments as elective deferrals and provide corresponding matching contributions to employees’ retirement accounts. This allows workers to grow retirement savings even while focusing on paying down debt.
9. 529-to-Roth Transfers
After 15 years, unused funds in a 529 college savings account can be rolled into a Roth IRA for the beneficiary, up to a $35,000 lifetime limit. This gives families greater flexibility and helps prevent 529 savings from going to waste.
10. Disaster-Related Withdrawals and Loans
The law expands options for disaster-related distributions from retirement plans. Qualified individuals may access up to $22,000 with the option to spread tax payments over three years. They may also be eligible to repay the funds or borrow up to $50,000, depending on their plan’s rules.
Bottom Line
While SECURE 2.0 offers valuable enhancements across the retirement planning spectrum, it also introduces complexity. From changes in RMD ages to new rules for Roth accounts and emergency savings, the law touches nearly every aspect of retirement planning.
The impact will change based on your financial situation. It is smart to talk to a financial advisor or tax professional. They can help you understand how the new rules affect you. They can also show you how to take advantage of the opportunities available.
Sources:
https://www.fidelity.com/learning-center/personal-finance/secure-act-2
Disclosure:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.