What you need to know about the SECURE Act 2.0

Even if you’ve covered all of the retirement planning bases – such as income generation, taxes, and inflation – there are still items to consider that could impact your future financial security. One such thing is new legislation. 

For instance, the SECURE Act (Setting Every Community Up for Retirement Enhancement) of 2019 enhanced various rules around retirement saving, such as eliminating the age limit on traditional IRA contributions and raising the required minimum distribution (RMD) age. Now Congress has passed the SECURE Act 2.0. 

This has also prompted changes in RMDs, as well as penalties for not taking such withdrawals. Other SECURE Act 2.0 provisions center around early withdrawals from retirement plans and “catch-up” contributions. With that in mind, you may wonder if the SECURE Act 2.0 could help or hinder your retirement. 

What are the Provisions of the SECURE Act 2.0? 

When passed in 2019, the initial SECURE Act did a number of things in an attempt to help Americans retire more comfortably. These included: 

• Allowing certain part-time employees to participate in employer-sponsored retirement plans. 
• Pushing back the age for traditional IRA and retirement plans required minimum distributions (RMD) from 70 ½ to 72. 
• Giving the thumbs up for 401(k) plans to offer annuities (which in turn could help retirees from outliving their income while it is still needed). 
• Eliminating the Stretch IRA, now requiring beneficiaries to use all inherited IRA funds within 10 years of the original IRA owner’s death. 

As a companion bill, the SECURE Act 2.0 – also referred to as the Securing a Strong Retirement Act – expands upon the original act by: 

• Increasing the limit for catch-up contributions under a retirement plan for individuals ages 60 to 63 to whichever is greater: $10,000 or 150% of the regular catch-up amount for 2024. 
• Emergency withdrawals are now permitted from your employer sponsored plans (like your 401k) for unforeseeable or immediate financial needs relating to personal or family emergency expenses, with limits. 
• The age for minimum required distributions is increased to 73 effective Jan. 1, 2023, and to 75 effective Jan. 1, 2033.
• Exempting investors/retirees who have less than $100,000 in retirement savings from having to make required minimum distributions at all. 
• Allowing employers to offer matching retirement contributions to employees who are paying off their student loans. 
• Providing a searchable national “lost and found” registry for missing retirement funds. 

While there appears to be some enticing updates in this new act, for those who are already retired, it may not necessarily be of much help. Especially for more mature investors who are still building their retirement plans, it is very important to not only be aware of new legislation but to properly plan for longer life expectancy and guaranteed retirement income, even when new laws are passed. 
 
Conclusion 

SECURE Act 2.0 is one of the broadest pieces of retirement plan legislation in decades. It impacts virtually all types of retirement plans and reflects Congress’ desire to increase retirement coverage and access, protect retirement plan assets, and simplify retirement plan operation and administration. SECURE Act 2.0 will have lasting impacts on retirement plans.  Employers sponsoring retirement plans need to be ready to implement the various changes on the various compliance dates and retirees need to be prepared for their future regardless of new or old legislation.   
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Summerlin Benefits Consulting helps our clients navigate the rules and requirements of their retirement plans and works with you to ensure you have a good solid strategy in place.