On December 23, 2022, Congress passed new legislation that will impact saving for retirement. The legislation known as Secure Act 2.0 follows up on the original Secure Act 1.0 of 2019, which changed rules on how you save and withdraw money from your retirement account. Secure Act 2.0 includes dozens of new provisions that were not part of the original version. Here are some of the highlights.
- The beginning age for the required minimum distribution (RMD) from an IRA is increased to age 73 this year and to 75 by 2033.
- Rules requiring minimum distributions from Roth 401Ks have been eliminated.
- Employers can now offer a Roth Simple IRA and Roth SEP IRA (previously unavailable).
- 529 College Savings Plans are now able to be converted to a Roth IRA with various restrictions. The plan must have been maintained for 15 years and the maximum allowable conversion is $35,000.
The Secure Act 2.0 provides an excellent reason to update your financial plan. Delayed RMDs mean additional years to make tax savings adjustments. For example, in some situations, Roth IRA conversions or front-loading years of charitable gifts can translate to significant tax savings.