The SECURE Act 2.0, signed into law in late 2022, brought significant changes to retirement savings and planning—namely, the rules around how retirement accounts work and can be used. As a retiree or someone approaching retirement, understanding these changes is crucial for optimizing your financial strategy. Let’s explore some key aspects that may directly impact you.
- Required Minimum Distributions (RMDs) at 73
Good news for those who want to keep their money invested longer! The age for taking RMDs has increased from 72 to 73 in 2023 and will further rise to 75 in 2033. This change allows your retirement funds more time to grow tax-deferred.
- Reduced Penalties for Missed RMDs
If you accidentally miss an RMD, you’ll face a less severe penalty. The tax has decreased from 50% to 25% of the amount not taken, and if corrected promptly, it can be further reduced to 10%.
- Elimination of RMDs for Roth 401(k)s
Starting in 2024, Roth 401(k) accounts will no longer be subject to RMDs during the owner’s lifetime, aligning them with Roth IRA rules. This change provides more flexibility in managing your tax-free retirement savings.
- Enhanced Catch-Up Contributions
For those aged 60 to 63, catch-up contribution limits to 401(k)s will increase from $7,500 to $10,000 annually starting in 2025. This boost can help you accelerate your savings as you near retirement.
- Employer Matching for Student Loan Payments
If you’re still paying off student loans, your employer can now “match” your loan payments with contributions to your retirement account. This innovative approach helps you save for retirement while managing education debt.