Secure Act 2.0 Overview

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In an ongoing effort to make retirement a viable option for Americans, President Biden signed into law the SECURE 2.0 Act of 2022 at the end of December. The Act was part of a $1.7 trillion budget bill.

The first round of the SECURE (Setting Every Community up for Retirement Enhancement) Act in 2019 included moving the RMD (Required Minimum Distribution) age to 72 from 70 1/2, removing the age limit for IRA contributions, and requiring inherited IRAs for non-spouses to be distributed within 10 years.

With 2.0, the RMD age has once again increased to 73 in 2023 and 75 in 2033. Other enhancements include:

  • The penalty for failing to take an RMD will decrease from 50% of the amount to 25%.
  • Beginning in 2023, people who are age 70½ and older may elect as part of their Qualified Charitable Distribution (QCD) limit a one-time gift up to $50,000, adjusted annually for inflation, to a charitable remainder unitrust, a charitable remainder annuity trust, or a charitable gift annuity. This is an expansion of the type of charity, or charities, that can receive a QCD. This amount counts toward the annual RMD if applicable. For gifts to count, they must come directly from your IRA by the end of the calendar year. QCDs cannot be made to all charities. 
  • Assets in 529 plans can now be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000. The rollover is treated as a contribution towards the annual Roth IRA contribution limit.
  • Have a 401k you may have forgotten about?  SECURE Act 2.0 enables the creation of a searchable database to help people find retirement benefits that they lost track of. The retirement savings “lost and found” will be housed at the Department of Labor and be created within the next two years.
  • Starting in 2024 RMDs will no longer be required from Roths in employer-sponsored retirement plans.
  • Catch-up contributions will increase for retirement savings plans. Starting January 1, 2025, individuals ages 60 through 63 years old will be able to make catch-up contributions up to $10,000 annually to a workplace plan, and that amount will be indexed to inflation. (The catch-up amount for people age 50 and older in 2023 is currently $7,500.)
  • Employers will now be able to offer matching contributions for Roth accounts. Previously, matching contributions were made on a pre-tax basis only, but employees will have the option of either now.
  • Beginning in 2024, 401k participants will be allowed to take an early “emergency” distribution to cover unforeseeable or immediate financial needs. The emergency distribution of up to $1,000 can be taken only once during the year but won't be subject to the usual additional 10 percent tax that applies to early distributions.