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Financial Planning
Jan 2023

Secure Act 2.0

By Alex Black, CFP®

New Year, new you, new retirement plan rules and regulations! That’s right, the “Consolidated Appropriations Act of 2023” (referred to as “the Secure Act 2.0”) has been signed into law. Much like the original Secure Act, which debuted in 2019, there have been some meaningful changes to how we can contribute to, and maintain, our retirement accounts. In contrast to its predecessor, Secure Act 2.0 has over 100 new provisions whereas the original had a dozen. With so many moving pieces, it is important to focus on thematic elements and key changes. Below we have summarized what we consider to be the more notable points.

1. The retirement account Required Minimum Distribution (RMD) age is being extended again. For individuals born between 1951 and 1959, your RMD starting age is now 73, and for those born in 1960 or later it is now 75.

2. Employers can now make matching contributions to employee Roth retirement accounts, not just traditional retirement accounts.

3. Catch-up contributions to employer-based retirement plans (additional amounts that can be contributed to 401(k), 403(b), 457, etc. accounts after age 50 are changing for those with high wage income. If you earned wages of more than $145,000 from an employer last year, your catch-up contributions this year will be required to be made to a Roth-account within the retirement plan. This means the funds will be taxed upfront, but they can grow tax-free for use in retirement.

* Note that this only appears to apply to W-2 wages, so high earning individuals paid differently than W-2 wages (i.e., owners or sole proprietors) would not be subject to this provision.

4. Beginning in 2024, funds in 529 plans can roll over to Roth IRA Accounts if not used to pay for education. These amounts are limited to regular Roth contribution limits (the lesser of an individual’s earned income or $5,000 per year) and are capped at a lifetime amount of $35,000 per person. For college grads with leftover funds in a 529 plan, this can be a great way to jumpstart saving for retirement!

5. Retirement catch-up contributions will be increasing automatically, over time. Previously, contribution limits were adjusted annually, in a manual format. Each type of retirement plan has its own set of rules, but the takeaway is that you will be able to save more as you get closer to your retirement!

6. Starting in 2026, you can establish 529 ABLE accounts for persons who become disabled prior to age 46. For those caring for a disabled individual, a 529 ABLE account can be a great way to save funds without losing eligibility for certain public benefit programs like Medicaid. The account can also grow tax-free as long as the funds are used for expenses associated with the care of that disabled individual.

There are many other changes in the roughly 400 page Act, but most appear to be correcting loopholes or tackling small fringe items that will have little to no impact on most Americans. If you have any questions about Secure Act 2.0, and its effects on you or your plan, please feel free to reach out.

Investing involves the risk of loss. Information provided is for informational purposes only, and should not be construed as advice. For your specific planning needs, please seek the advice of Integris, your tax accountant, attorney, insurance agent, or other professional as appropriate.

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