New Legislation: Secure Act 2.0
The SECURE (Setting Every Community Up for Retirement Enhancement) Act was first signed into law on Dec. 20, 2019. The original iteration of the bill made several much-needed adjustments to the country’s retirement system. However, it wasn’t a comprehensive solution. Throughout 2022, various provisions were debated in Congress and ultimately the new SECURE 2.0 was signed into law by President Biden on Dec. 29, 2022. Here are some key provisions:
- Increasing the age when RMDs (required minimum distributions) would need to start: SECURE 2.0 increases the RMD age from 72 to age 73 in 2023, and then to age 75 in 2033. Additionally, the penalty for failing to take RMDs would be reduced to 25%, and in some cases 10%, from the current 50%.
- Creating bigger “catch-up” contributions for older retirement savers: Under current law, you can put an extra $6,500 annually in your 401(k) once you reach age 50. SECURE 2.0 will increase the limit to $10,000 starting in 2025 for savers ages 60 to 63 and catch-up amounts will also be indexed for inflation.
- Requiring automatic 401(k) enrollment: Employers will now be required to automatically enroll employees in their 401(k) plan at a rate of least 3% but not more than 10%. However, businesses with 10 or fewer workers and new companies in business for less than three years are excluded from the mandate.
- Broadening uses for unused college savings money: A provision allows for tax- and penalty-free rollovers to Roth IRAs from 529 college savings accounts that are at least 15 years old, within limits.