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The SECURE Act 2.0 effective now


Jamie Rugg, CFP®

The SECURE Act 2.0 effective now

As anticipated, Congress passed the Secure Act 2.0 in late December in conjunction with the omnibus spending bill. We will outline the key provisions of the new Secure Act 2.0 that could impact your personal finances. Let’s jump into an overview of the significant changes before diving into the background of the bill and what each change can mean for you and your family. 

Secure Act 2.0 - Key Provisions

  • Starting age for RMDs increases to 73 in 2023, 75 in 2033
  • Reduced penalty for late RMDs from 50% to 25%
  • Increased Qualified Charitable Distribution amount from IRAs
  • Additional Charitable tax planning options
  • Catch-up 401(k) contributions will increase in 2025
  • RMDs will no longer be required from Roth accounts from 2024 onward
  • Left-over 529 plans can become Roth Rollovers
  • Allowed matching employer retirement plan contributions for student loan payments

Many readers may remember prior newsletter articles that outlined the late December 2019 passage of the original SECURE Act or Setting Every Community Up for Retirement Enhancement. Among the provisions of the bill were a few unexpected changes to retirement aspects such as new and more complex inherited IRA rules and raising the age for starting required Minimum distributions (RMDS) to 72, among others. 

The original bill intended–as the name implies–to help more Americans save and be prepared for a comfortable retirement. Among other changes in 2019 were tax credits for small businesses just launching a retirement plan for workers, and other incentives to support small business retirement plans. The SECURE Act 2.0 increased some of these business credits and added auto-enrollment features for new plan participants, made part-time workers eligible for retirement plans in two years instead of three, and other incentives to help small businesses support workers in saving for the future. 

Almost as soon as its passage in 2018, and in the ensuing years, we heard about a planned Secure Act 2.0 to expand upon some of the changes, and make clarifications to the new provisions. You may have heard about the Secure Act 2.0 in the headlines recently, or it may have gotten lost with the latest political headlines splashing the pages in December and January. Here are the key provisions which could impact you, or create possible planning opportunities.  


There is some good news for individuals who are close to their required minimum distribution (RMD) start date. Effective for 2023, the RMD starting age has been pushed back again to age 73 instead of 72. Starting in 2032 the RMD starting age commences at age 75. Prior to this new change, the required start date meant taking your first RMD by April of the year after you turned 72. So anyone turning 73 on or after January 1st, 2023 can now wait to take their first RMD until tax day of 2024.  

It is important to note that for the first RMD only, someone waiting until April of the following year will need to take out a second RMD during that calendar year– for the prior year and the current year. For example, if you turn 73 in 2023, you would need to take your first RMD by April 2024 and another RMD by December 31st, 2024–the first RMD reflecting your 2023 RMD, the second for the calendar year of 2024. 

Anyone turning 75 on or after January 1, 2033, will have an effective starting age of 75 to begin taking their required minimum distribution. If you are close to your RMD starting age and have questions about where exactly you fall and when you need to begin your RMD, please contact your Highline advisor. 

Reduced Penalty for late RMDs

One particularly painful provision with RMDs has gratefully been changed. Prior to SECURE Act 2.0 an individual who did not take their RMD by December 31st would have to pay a 50% penalty for not taking their money out in time. This punitive penalty has been reduced to a 25%, and in certain cases, 10% if the error is fixed in a timely manner. It is still crucial to take RMDs before the end of the calendar year, whether by setting up an automatic date for withdrawal with TD Ameritrade or Schwab for our clients, regular monthly withdrawals, or manually depending on your timing preference. 

At Highline, we actively contact clients in the fall who have not yet satisfied their RMDs to ensure this penalty is avoided. If you would like to set up a date for an automatic withdrawal of your required minimum distribution for the year, please contact our operations team to assist you. 

Qualified Charitable Distribution Increase

Qualified Charitable Distributions allow individuals who are in their RMD year to give directly to charity and avoid paying taxes on the amount of their charitable distribution. Starting in 2024, the Qualified Charitable Distribution, or QCD, maximum amount will be indexed to inflation. 

Currently, an individual who does need the monies from their RMD can elect to have all or part of their RMD sent directly to a charity for the purposes of 1) giving to a desired charity during their lifetime and 2) avoiding paying taxes on that distribution. You do not receive a tax deduction for the charitable distribution, however, the money you give gets carved out from what you recognize on your tax return. For example, let’s say an individual has a $75,000 required minimum distribution this year. They decide to make use of a QCD to give $50,000 to their favorite charity. Generally, all traditional IRA distributions are taxable, unless a QCD is used where the money goes directly to the charity.. Instead of paying taxes on the full $75,000 that they have to withdraw from their IRA account during the year, they will only recognize paying taxes on the $25,000 that did not go to charity. It is important to note that the QCD must be done at the time of the distribution, if you receive your distribution and then give some of it to charity, the full amount of your distribution is taxable. 

In 2023 the maximum amount that can be distributed from a qualified charitable distribution is $100,000. Having this amount indexed for inflation for 2024 and beyond should provide an additional tax planning opportunity for some individuals. There are a few additional charitable planning changes in SECURE Act 2.0 that allow for one-time charitable annuities and other gifts from an IRA. The amount allowed is on the small side, and likely has a marginal benefit for an individual with additional paperwork and tracking, but we are happy to see some increases being made in charitable options from retirement accounts. If you have specific questions about these other charitable changes, please contact your Highline advisor or qualified tax professional. 

Catch-up retirement contributions 

When an individual reaches age 50, the government allows for more money to be set aside in qualified retirement plans to shore up retirement savings. Currently, individuals over the age of 50 can make catch-up contributions of $1000 in IRA accounts after reaching the $6,500 IRA maximum. Catch-up contributions in IRAs and Roth IRAs will start to be indexed to inflation and increase in $100 increments rather than stay at the set $1,000 which does not make a significant impact on savings. 

In company-sponsored plans like 401(k)s and 403(b)s after maxing out the $22,500 standard contributions, individuals over 50 can set aside an additional $7,500 in these qualified retirement accounts.  In 2025 the government will allow an accelerated amount to be set aside for people ages 60, 61, 62, and 63, hopefully providing meaningful ways to save in many workers' final earning years. Right now the language is a bit unclear but written to allow individuals to contribute up to $10,000 in extra contributions from their paycheck to be put into their company retirement plans. Starting in 2026 this amount will be indexed to inflation as well. 

One point to note is that high-wage earners who make these catch-up contributions are expected to have them go into a Roth 401(k) account, meaning these individuals will pay taxes on the income before the money is placed into their retirement accounts. We have seen a number of provisions allowing for increased flexibility to Roth-style accounts where taxes are paid on the way in, rather than on the way out like in traditional 401(k)s or IRAs. Seemingly, the government needs the additional immediate tax revenue from Roth contributions to offset other costs in the omnibus bill that passed.  

RMDs are no longer required from Roth Accounts 

Required minimum distributions used to be necessary even for Roth accounts where taxes have already been paid on funds on the way in. For example in 2023 today, an 80-year-old individual with a Roth IRA account would still need to take their RMD amount out from their Roth account by the end of 2023. The amount of money taken out will not be subject to income taxes since the person already paid taxes on the funds, but a certain amount has to be withdrawn regardless. Most individuals end up rolling Roth 401(k), Roth 403(b), and Roth 457 accounts into a Roth IRA where RMDs are not required. Starting in 2024, this rule will no longer apply and RMDs will not be required for any type of Roth retirement account. 

529 plans can roll over to Roth IRAs

One change that has received more attention with the SECURE Act 2.0 passage is allowing unused portions of a 529 plan account to be rolled over one time to a Roth IRA. While there have been many headlines about this change, there are some definite limitations that individuals should be mindful of before employing this one as a planning strategy. 

  • The bill allows for a maximum total rollover amount of up to $35,000
  • The rollover has to be for the 529 plan beneficiary 
  • The account has to have been opened for at least 15 years
  • Contributions from the last 5 years prior to a rollover cannot be included
  • The $35k maximum cannot be contributed in one year but must be done over a number of years

The 529 plan change will most directly affect families with younger children or planning for the next generation. As the text is currently written, parents of babies or young children who plan to meaningfully contribute to a 529 plan for a child, should open and fund a 529 account as soon as possible even if the initial amount is just a few dollars. 

One limitation involves the maximum amount that can be contributed in any given year. The government does not want these funds to be used to jump-start a Roth IRA for a child who does not the funds for college, to begin with. The maximum amount that can be rolled each year over will follow the same Roth IRA rules for any worker, namely, $6,500 and there must be earned income. Let’s say two parents have leftover 529 plan funds after their child graduates since the child received a partial scholarship. Once the parents know they will not be using those funds, they could create a Roth IRA account on behalf of the graduated child and begin rolling over those funds in a maximum of $6,500 per year into a Roth IRA. If the child is working and making their own contributions to a Roth IRA those direct contributions will offset how much the parents can transfer over. All IRA accounts have an annual maximum of $6,500 total for one individual–there cannot be double dipping. 

Being able to start a Roth IRA for a child is hugely beneficial for them in their retirement years. Those extra years of saving, investing, and compounding can be extremely significant 40-50 years down the line but will require some additional work, tax planning, and coordination in order to get the benefit. 

Student Loan Payments qualify for an employer match

One provision many people across the country have vocally welcomed is the ability for employers to match part of an employee’s student loan payment into a company retirement plan. With the increased cost of funding a college education, many younger workers are left in the unenviable position of having to make student loan payments, and not being able to set aside savings in their company’s retirement plan. The student loan payment qualification has been a long-time coming and is something many employers are looking forward to using to help provide employment benefits and savings to workers. The amount a worker contributes to their student loan payment can qualify for the company match. Like many of the SECURE Act 2.0 changes, this student loan payment change will not take place overnight and will require employers to adopt and modify their retirement plans along with coordination for student loan receipts. 

SECURE Act 2.0 provides a number of other changes and tweaks to existing retirement provisions, to find out more about the impacts and opportunities for employers, contact our corporate services team, or view a recent video on the topic hosted by Highline’s Hugh Meyer and Aaron Morris. 

If you would like to find out more about the changes for individuals please feel welcome to speak with your Highline advisor or contact. 

Secure 2.0_Section by Section Summary 12-19-22, https://www.finance.senate.gov/imo/media/doc 
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