In the final days of 2022, our nation’s lawmakers came together and approved a slate of changes designed to help Americans save more for retirement.
The changes are a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act, enacted into law in late 2019, which updated the rules around how you can save and withdraw money from your retirement accounts.1
Changes To Retirement Start in 2023
SECURE 2.0 contains dozens of provisions, and the highlights include increasing the age at which retirees must begin taking required minimum distributions (RMDs) from retirement accounts and changes to the catch-up contributions for older workers with workplace retirement plans.
“But divide your investment among many places, for you do not know what risks might lie ahead.” Ecclesiastes 11:2
Note that retirement rules can change without notice, and there is no guarantee that the treatment of certain rules will remain the same. This article is for information purposes only and is not intended as a substitute for real-life advice. Here are a few updated rules that you may want to review with us.
Change to RMDs. Starting January 1, 2023, the age at which owners of retirement accounts must start taking RMDs increases to 73 years. Two important considerations: first, if you turned 72 in 2022 or earlier, the new law says you will need to continue taking RMDs; second, if you are turning 72 in 2023 and have already scheduled your withdrawal, you may want to review your strategy with us. Moreover, the new rule suggests that starting in 2033, RMDs must start at age 75.2
A Boost to Catch-Up Contributions. Starting January 1, 2025, investors aged 60 through 63 will be able to make catch-up contributions up to $10,000 annually to workplace retirement plans. The catch-up amount for people aged 50 and older in 2023 is $7,500. However, the law applies certain stipulations to individuals earning more than $145,000 annually. We may be able to provide more guidance to your specific situation.2
Support for Small Businesses. The new law increases the credit to help with administrative costs of setting up a retirement plan. The credit increases to 100% from 50% for businesses with less than 50 employees. Lawmakers hope that boosting the credit will eliminate one of the biggest barriers for small businesses offering a workplace plan.3
Student Loan Debt. One impediment to saving for retirement is balancing student loan payments with contributions to retirement plans. SECURE 2.0 allows employers to make matching contributions on behalf of the employee in a workplace retirement plan with respect to “qualified student loan repayments.”3
Access to Emergency Funds. Employees will be allowed to access their retirement savings to cover unexpected expenses without incurring a penalty. The employee will have to replace those funds before making a similar withdrawal.4
More Details to Follow
A number of other provisions are tucked into the legislation. For example, one provision allows 529 plans to get rolled over, and another provision expands access to workplace plans for part-time employees.5
SECURE 2.0 was part of the 4,100-page, $1.7 trillion federal spending bill, so as more people become familiar with the legislation, more details will emerge. We will be getting more information on the updated rules as the new year gets underway, so if you are looking for guidance, we may have more detailed information for you.
- PlanAdvisor.com, December 23, 2022
- Fidelity.com, December 23, 2022
- ThinkAdvisor.com, July 18, 2022
- CNBC.com, December 22, 2022
- Fidelity.com, December 23, 202