In December 2019, Congress passed the original Setting Every Community Up for Retirement Enhancement (SECURE) Act, a major piece of legislation that had a far-reaching impact on the U.S. retirement system.
Despite these meaningful changes, there remained a bipartisan appetite to further modify various areas of the retirement system. Many of those desired changes became law as part of the $1.7 trillion omnibus spending package that passed in December 2022. This package contains provisions from a separate piece of standalone legislation, dubbed SECURE Act 2.0. Some provisions build on components of the original SECURE Act, while others are completely new in scope.
Some of these provisions build on components of the original SECURE Act; others are completely new in scope. We highlight a few of the major headlines below:
Retirement Contributions and Required Minimum Distributions
- Increases the Required Minimum Distribution (RMD) age from 72 to 73. In 2033, the RMD age will increase again to 75. The RMD age is the age at which you must begin taking withdrawals from pre-tax retirement accounts.
- Reduces the penalty for missed RMD payments from 50% of the unsatisfied amount to 25% (10% in some situations).
- Starting in 2024, catch-up contributions from taxpayers age 50 or older must be placed into a Roth account using after-tax dollars. Only applies to those earning $145,000 or more (indexed to inflation).
- Starting in 2025, workers aged 60-63 will be able to make an additional contribution beyond the standard age 50 catch-up limit, the greater of $10,000 or 150% of the indexed catch-up limit ($7,500 in 2023).
College Savings Plans
- Starting in 2024, 529 Savings Plan beneficiaries will be able to roll up to $35,000 into a Roth IRA over their lifetimes, ensuring that these assets continue to grow tax-free (annual IRA contribution limits still apply).
Charitable Giving
- Starting in 2024, the maximum Qualified Charitable Distribution (QCDs) amount will be indexed to inflation. The current maximum QCD amount is $100,000/year. QCDs allow you to satisfy your RMD requirements by distributing assets directly from your IRA to a qualified 501(c)(3) charity.
- Allows for a one-time, tax-free transfer of up to $50,000 from an IRA to select split-interest charitable vehicles, such as a Charitable Remainder Trust or Charitable Gift Annuity.
To learn more, please download our SECURE Act 2.0 Guide below. If you have any questions about the SECURE Act 2.0 provisions or how your retirement plan might be impacted, call us at 310-556-2502, email advice@westmount.com, or contact your Westmount advisor directly.
Disclosures
This article was prepared by Westmount Asset Management, LLC (“Westmount”). Westmount is registered as an investment advisor with the U.S. Securities and Exchange Commission. The information contained in this article was prepared using sources that Westmount believes are reliable, but Westmount does not guarantee its accuracy. The information reflects subjective judgments, assumptions and Westmount’s opinion on the date made and may change without notice. Westmount undertakes no obligation to update this information. It is for information purposes only and should not be used or construed as investment, legal or tax advice, nor as an offer to sell or a solicitation of an offer to buy any security. No part of this article may be copied in any form, by any means, or redistributed, published, circulated or commercially exploited in any manner without Westmount’s prior written consent.
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