Oct 9, 2023
What’s New with the SECURE 2.0 Act
With the introduction of the SECURE Act, and later the SECURE 2.0 Act of 2022, new opportunities have arisen that may impact how you plan for your retirement years. From changes to required minimum distributions (RMDs) to new Roth IRA options and catch-up contribution updates, here’s what you need to know.
1. RMD age adjustments effective in 2023
The age requirements for RMDs have been changed yet again with the passing of the SECURE 2.0 Act. Here’s how the new RMD ages break down:1
- If your birth year is 1960 or later, your new RMD age is 75.
- If your birth year is between 1951 and 1959, your new RMD age is 73.
- If your birth year is 1950 or earlier, you fall under the previous rules of RMD age 70.5 or 72. If you fall into this category, you're likely already receiving your RMDs.
IRS Notice 2023-54
Investors who turned 72 in 2023 now qualify for the new RMD age of 73. Some may have mistakenly taken a distribution in 2023 from their custodian or plan administrator, under the assumption that they were required to do so this year. To remedy this issue, the IRS allows an extended rollback period to return the funds to their IRA. The deadline for this rollback is September 30, 2023.2
2. 10-year inherited IRA RMD forgiveness is extended again
In the original SECURE Act, IRAs inherited by beneficiaries from 2020 onward are usually subject to withdrawing the entire account within 10 years, in addition to annual RMDs. The IRS has granted exceptions for missed RMDs in 2021, 2022 and now 2023 for individuals who died in 2020, 2021 and 2022 respectively.3 It’s important to remember that you are still required to deplete the account entirely by the tenth year;4 only the annual RMD has been forgiven.
Be mindful that forgoing an RMD this year may save you taxes today but cost you more in the future. For instance, if you find yourself in a lower income bracket this year than in the future, retaining the distribution could strategically reduce future taxes.
3. New Roth opportunities effective in 2023
The SECURE 2.0 Act presents more opportunities for Roth IRA contributions. Roth options are now available for the following retirement plan types:5
- SEP IRA
- SIMPLE IRA
Additionally, employer-matching contributions can now be made as Roth contributions. This new flexibility allows you to tailor your retirement savings strategy to your unique financial situation.6
4. Catch-up contribution updates effective in 2024
Catch-up contributions are a tool for those looking to boost their retirement savings as they approach retirement. Here are two of the important changes coming in 2024:
- IRA and Roth IRA catch-up contributions will be indexed for inflation. No longer fixed at $1,000, these contribution limits will be adjusted over time.7
- Catch-up contributions made to employer-sponsored plans will be subject to income testing. If your wages exceed $145,000 (adjusted yearly) and you are over the age of 50, your catch-up contributions must be made as Roth contributions.8 While not ideal for tax savings today, this could benefit high earners down the road.
The flexibility for Roth contributions in SEP IRAs, SIMPLE IRAs and catch-up contributions in employer-sponsored plans will depend on the ability of plan sponsors to adopt and implement these new offerings.
The SECURE 2.0 Act introduces several changes to retirement planning that help cater to individuals’ ever-changing needs and preferences. Staying informed about these legislative changes and working with financial professionals like your Corient Wealth Advisor can empower you to make the most of these new opportunities.
ABOUT THE AUTHOR
Jasmyn Vickery is an Associate Wealth Strategist and joined the Corient Private Wealth in 2023. Prior to coming to the firm, she completed a financial planning residency with a firm based in Virginia. Jasmyn graduated from Virginia Tech with a Bachelor of Science degree majoring in Finance, CFP® Certification Education Option. Jasmyn is a CERTIFIED FINANCIAL PLANNER professional.
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