The SECURE Act, which stands for Setting Every Community Up for Retirement Enhancement, was written into law to help more people save more for retirement. Now, the SECURE Act 2.0 has been signed into law. There are a number of changes likely to affect your retirement, legacy, and estate planning in different ways.
An important note: there are many details and exceptions, so not every element below will apply to all!
Those who are closer to retirement will find these provisions helpful:
This year, the age at which you’ll need to start taking required minimum distributions from your retirement accounts will increase to 73. In 2033, that age will increase to 75. If you’re already 72 or older, this does not affect you. Otherwise, you may want to reconsider your withdrawal plan.
There is more good news: as of this year, the penalty for not taking required minimum distributions will drop to 25% of the amount of those required minimum distributions. And as of next year, if you have a Roth account in an employer retirement plan, required minimum distributions will no longer be required.
In 2025, higher catch-up contributions will be allowed for 401(k), 403(b), government plans, and IRAs. The amounts and details depend on your age and your type of plan; it’s best to check with your estate planning attorney or wealth advisor to confirm. This year, the IRA catch-up contribution limit is limited to $1,000 for those 50 or older, but that amount will be indexed to inflation starting next year.
If your employer chooses to offer this, you will be able to contribute to a Roth account, after tax, so that your account can grow tax-free.
As of this year, those who are at least 70.5 years old can contribute a one-time gift of up to $50,000 to a charitable remainder unitrust, a charitable remainder annuity trust, or a charitable gift annuity. This amount will count toward your annual required minimum distribution.
Those who are starting careers and families—and who are further away from retirement—will appreciate these provisions:
Beginning in 2025, any business that opens a new 401(k) or 403(b) plan will need to automatically enroll anyone who is eligible. And, retirement plan service providers will be able to offer to transfer an employee’s retirement account when that person changes jobs.
Beginning next year, defined contribution retirement plans can add an emergency savings account that is tied to a Roth account. You’ll need to meet the requirements, and the limit right now is $2,500 or less, but the first four withdrawals each year are penalty-free.
In 2024, your employer will be able to match your student loan payment with a contribution to your retirement account to help people save for retirement while paying off student loans.
This can happen only after 15 years, but funds in a 529 plan (an educational savings plan) can be rolled over to a Roth IRA for the beneficiary. The lifetime limit is $35,000.
If this sounds complicated, do not worry, we are here to help. If you have any questions or would like to set up a consultation, please contact us.
More on the SECURE Act: This is the first of three blog posts that detail how the SECURE Act may affect your estate planning and your legacy. Read more about how stretch distributions have changed and whether you should make a trust the beneficiary of your IRA.
To proactively adapt your plan to changes in estate and tax laws and regulations, we recommend that our clients enroll in the JM LAW CARES estate and legacy planning maintenance program. To find out more, see our overview of the JM LAW CARES program.
This post was created by Jessica Marchegiano, founder of JM LAW and senior estate planning attorney.
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Disclaimer: Materials prepared by JM LAW, PLLC are for general informational purposes only. Educational material does not create an attorney-client relationship and is not an offer to represent you. You should not act or refrain from acting based on information provided.