Accretive On: Secure Act 2.0

January 11, 2023

The first iteration of The Setting Every Community Up for Retirement Enhancement (SECURE) Act became law just over three years ago. It succeeded the TCJA of 2017 and preceded the CARES Act of 2020 by four months. Congress had previously floated the second version of the SECURE Act in 2021. Like the previously proposed bill, SECURE 2.0 included numerous changes to various retirement accounts and planning rules. We will touch on the most relevant areas to our readers.

Required Minimum Distributions (RMDs) Changes

Start Dates (Section 107): The age at which RMDs are to begin was pushed back from age 72 to 73. Therefore, if you were born in 1951 and were expecting to begin IRA withdrawals for the first time this year (or by April 1, 2024), the new date for taking your first RMD is now April 1, 2025. In addition, the bill includes a beginning age of 75 for those born in 1960 or later. The following is a summary of the ages at which RMDs are mostly required to begin under SECURE 2.0:

Employer-Sponsored Roth Accounts (Section 325): Previously, Roth 401k accounts had RMDs unlike the rules of Roth IRA owners, who have never been required to take distributions. For the first time, owners of Roth balances in their employer-sponsored plans will not have RMDs beginning in 2024.

RMD Penalties (Section 302): The penalty for failing to satisfy an RMD had previously been an astonishing 50% of the RMD amount not taken. The standard penalty will reduce to 25% of the amount not taken, and potentially even to 10%, if the IRA owner corrects their mistake by withdrawing the RMD amount previously not taken and files a corrected/amended tax return promptly.

Qualified Charitable Distributions (Section 307)

The maximum annual QCD amount will be indexed to inflation for the first time beginning in 2024. The maximum annual amount has been $100,000 (per IRA owner) since the rule was introduced in 2006.

Beginning in 2023, people aged 70.5 and older can elect a one-time gift of up to $50,000, to an expanded list of charity types. For example, as part of an IRA owner’s QCD limit, a one-time gift up to $50,000(adjusted for inflation) can be made to a charitable remainder unitrust (CRUT), charitable remainder annuity trust (CRAT), or a charitable gift annuity. *Given the complexity and potential costs involved with establishing a CRUT or CRAT, this strategy should be discussed with your financial, tax, and legal advisors. In addition, Section 307 of SECURE 2.0 explicitly states that a gift to a CRUT or CRAT will only satisfy a QCD “if such (uni)trust is funded exclusively by qualified charitable distributions.”

Retirement Account Updates

Higher catch-up contributions (Sections 108-109): Beginning January 1, 2025, those between the age of 60 and 63 will be able to make catch-up contributions to the greater of $10,000, or 150% of the regular catch-up contribution amount annually to an employer-sponsored plan, indexed for inflation. The previous (standard) catch-up contribution for 2023 is $7500 for people 50 and older.

*There is an income limit that applies to pre-tax catch-up contributions. Those with incomes over $145,000 are only limited to Roth account (catch-up) contributions.

The $1,000 catch-up contribution for IRA owners will be indexed for inflation (in $100 increments) beginning in 2024.

529-to-Roth IRA Transfers (Section 126)

One of the most headline-grabbing elements of SECURE 2.0 is the new ability of some 529 beneficiaries to transfer money directly from a 529 to a Roth IRA. However, this ability comes with caveats and will begin in 2024. Most notably, the Roth IRA must have existed for 15 years, is subject to annual Roth contribution limits, and has a lifetime aggregate limit of $35,000 per individual.

Several other provisions of SECURE 2.0 impact the ability to save for retirement. As always, please speak with your financial or tax advisors to understand how these changes may apply to you, as everyone’s financial situation is different.


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