Congress spent the final days of 2022 on new reforms designed to help Americans save more for retirement. You may hear the changes called SECURE Act 2.0, which is a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.
Required Minimum Distributions (RMDs) are retirement account distributions based on age and life-expectancy. Effectively January 1, 2023 the beginning RMD age has increased from age 72 to 73. As a result, no one is required to begin RMDs in 2023. The RMD age changes again to age 75 in 2033. Everyone already required to take RMDs must continue to do so.
Catch-Up Contributions for 401k plans and IRAs have been around a number of years for those age 50 and older. Beginning in 2024 catch-up contributions for IRAs will based on a COLA. Beginning in 2025 401K plan participants ages 60-63 will be able to increase their catch-up contributions to $10,000 (or 150% of the regular catch-up provision amount).
Qualified Charitable Donations (QCDs) were first introduced more than 15 years ago with a maximum annual amount limited to $100,000. Beginning in 2024 the QCD limit will be linked to inflation with an annual COLA adjustment.
529 College Savings Plans have changes too. Beginning in 2024 owners of 529 accounts can convert some of the account to a Roth IRA, but only if specific guidelines are followed. The account must have been owned at least 15 years with the conversion to a Roth IRA being in the name of the beneficiary (designated student) not the owner. There are other rules to follow.
If you have any questions about SECURE Act 2.0 contact us here.