SECURE ACT 2.0 - One Thing We Can Count On Is Change

The SECURE ACT 2.0 of 2022 has prompted some changes that you should be aware of. One of which is to hang onto your retirement funds a little longer depending on your age.

RMD Age has increased from 72 to age 73 for those born in 1951 to 1958, and if you were born in 1959 or later your RMD will start at age 75. Good news! For those who qualify you have the option to keep your funds in your retirement plan a bit longer before you are required to start distributions.

One other highlight to be aware of is a provision for correcting mistakes.  The excise tax for missing an RMD (or a shortfall, not taking enough) has been reduced from 50% to 25%. And if the mistake is corrected in a timely manner, the 25% is further reduced to 10%.  This is a dramatic benefit to those who missed taking their required distribution.

In addition, but not effective until January 1, 2024, IRA catch-up contributions will be indexed for inflation, in the same manner as the indexing for regular IRA contributions.   For other plans (401k and SIMPLE) the limits increase won’t go into effect until 2025.

The updates also impact 529 plans.  Now, 529-to-Roth IRA transfers can be made tax and penalty-free to a Roth account for the same beneficiary. As long as the following applies:  529 account was open for 15 or more years and the amount does not exceed the annual Roth IRA contribution limits or the lifetime maximum of $35,000.   This is effective January 1, 2024.

The updates in the SECURE 2.0 ACT of 2022 aren’t limited to the items above, these are just some highlights for you.  Be sure to read it to see if you have any other benefits or changes you can take advantage of. Talk to your tax professional or financial advisor, they can help you review what benefits you may receive from these recent updates.

Check out the full document here:   SECURE ACT 2.0

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.