Make the most of SECURE Act 2.0 – 6 new opportunities to explore
SECURE Act 2.0, which became law in December 2022, includes many changes that may help you better reach your retirement and other financial goals. But which provisions might affect you the most, and when can you start planning for new opportunities?
Given the recency of the law, there are still some unknowns as regulators, retirement plan administrators and employers work through the logistics. However, as SECURE Act 2.0 takes effect over the coming years, an Ameriprise financial advisor will help you identify and implement strategies to take advantage of its benefits.
Here are opportunities to explore:
If you're in retirement...
1. Consider how the new RMD ages will impact your retirement withdrawal strategy
What SECURE Act 2.0 changed: The law increases the required minimum distribution (RMD) age first from 72 to 73 years old, and then to 75 in 2033.1
Opportunity to explore: Consider how you may use the additional time and flexibility to manage your retirement withdrawals strategically. However, fewer years to take RMDs can have potential tax and estate planning implications. Connect with a financial advisor to discuss how delaying RMDs may impact your broader financial picture.
What investors should consider: While the new RMD ages may be welcome news to some, holding money in pre-tax accounts until RMDs begin isn't always the best strategy due to:
- Tax and Medicare implications: Because some Medicare premiums and Social Security taxation are determined by your income, taking out more in RMDs in your later years could result in higher Medicare surcharges and higher taxes.
- Estate planning implications: Inherited retirement plan assets generally must be distributed within 10 years by a non-spouse beneficiary. If your account balances are high, this can increase the taxes beneficiaries pay on their inheritance.2
2. Take advantage of the increased limits for qualified charitable distributions in 2024
What SECURE Act 2.0 changed: The limit on qualified charitable distributions (QCDs), which has been capped at $100,000 since its introduction in 2006, will be indexed for annual inflation beginning in 2024. Changes under the new law also allow for a one-time gift of up to $50,000 from an IRA to a split-interest entity.3
Opportunity to explore: If you plan to transfer funds from an IRA to a charity, consider how you may be able to donate a larger amount starting in 2024. Additionally, though the RMD age has increased, the age at which you can start taking QCDs remains 70½. Taking advantage of QCDs before you reach your RMD age can potentially help you reduce taxes now and reduce your RMDs in later years.
What investors should consider: QCDs are only available from IRAs and not from 401(k) plans.
If you are saving for retirement ...
3. Make bigger catch-up contributions beginning in 2024 and 2025
What SECURE 2.0 Act changed: Starting in 2024, IRA catch-up contribution limits will be adjusted for inflation each year.4 (IRA catch-up limits were previously fixed unless an increase was approved by law.) Starting in 2025, employees who are 60 to 63 years old will be able to make larger catch-up contributions to 401(k), 403(b), 457(b), SIMPLE IRA and SIMPLE 401(k) plans.5
|New limits for catch-up contributions|
|IRAs and Roth IRAs||$1,000 catch-up indexed for inflation beginning in 2024|
|401(k), 403(b) and 457(b) plans||The greater of $10,000 or 150% of the normal catch-up limit beginning in 2025|
|SIMPLE IRAs and SIMPLE 401(k) plans||The greater of $5,000 or 150% of the normal catch-up limit beginning in 2025|
Opportunity to explore: The new limits can help boost your retirement accounts during your final working years. Talk to a financial advisor about how you may want to free up cash flow to take advantage of the increased limits when they go into effect.
What investors should consider: If the employee’s prior-year wages exceeded $145,000, the catch-up contribution must be made as a Roth contribution for non-IRA plans beginning in 2026. A financial advisor can help you evaluate the benefit of these Roth contributions.
4. Consider how Roth changes can help you reach your financial goals
What SECURE 2.0 Act changed: Starting in 2024, RMDs will be eliminated for Roth 401(k) accounts.6 Additionally, effective this year, the new law allows for employer matching or profit-sharing Roth contributions and Roth contributions to SEP and SIMPLE IRAs.
Opportunity to explore: These changes increase the number of options an investor can leverage to diversify their retirement portfolio, from a tax perspective. Many investors gravitate toward tax-deferred accounts — such as a 401(k) — and thus, may to be overweighted in investments that will be taxed in retirement. SECURE Act 2.0 makes Roth contributions — which are not taxed in retirement — a more accessible and attractive option for investors.
What investors should consider: Further guidance from the Treasury Department is still needed to implement Roth matching or profit sharing and contributions to SEP and SIMPLE IRAs.
If you are saving for — or paying off — education costs ...
5. Invest in a loved one’s education and retirement with a 529 gift
What SECURE Act 2.0 changed: Starting in 2024, 529 plan owners will be allowed transfer funds from a 529 plan that’s at least 15 years old to a Roth IRA account in the beneficiary’s name. With this change, if your loved one doesn’t use the full amount of their 529 savings on qualified educational expenses, the remaining funds (up to a maximum of $35,000) can help jumpstart their retirement savings.
Opportunity to explore: Parents and grandparents can feel more confident about opening and funding a 529 account. If you are saving for a loved one’s education, you may want to consider if you’d like to increase your 529 plan contributions — or open an account — considering this new change.
What investors should consider: Although this change applies in 2024, the IRS still needs to issue guidance on how providers should process the transactions, so it may not be immediately available. Additionally, the amount of assets moved to the Roth is subject to the Roth IRA contribution limits and the Roth IRA owner must have earned income.
6. Check if your employer will offer a student loan match benefit
What SECURE ACT 2.0 changed: Starting in 2024, employers will be allowed to make matching contributions on various retirement plans for qualified student loan payments.
Opportunity to explore: If you are repaying student loans, check to see if your employer will begin to offer a match benefit.7 A financial advisor will help determine how this match may fit into your overall financial strategy.
What investors should consider: While this change goes into effect in 2024, it’s likely it will take some time for employers and plan administrators to implement this new benefit.
Make the most of SECURE Act 2.0
Whether you’re already in retirement, saving for retirement, or trying to balance your retirement goals with education costs, the SECURE Act 2.0 changes offer investors a unique opportunity. Connect with an Ameriprise financial advisor to learn how this new law can help you better meet your financial goals.
1 U.S. Senate, SECURE Act 2.0 of 2022, (section 107) https://www.finance.senate.gov/download/retirement-section-by-section-
2 The Internal Revenue Service, Publication 590-B (2022), Distributions from Individual Retirement Arrangements (IRAs), https://www.irs.gov/publications/p590b
3 U.S. Senate, SECURE Act 2.0 of 2022, (section 307) https://www.finance.senate.gov/download/retirement-section-by-section-
4 U.S. Senate, SECURE Act 2.0 of 2022, (section 108) https://www.finance.senate.gov/download/retirement-section-by-section-
5 U.S. Senate, SECURE Act 2.0 of 2022, (section 109) https://www.finance.senate.gov/download/retirement-section-by-section-
6 U.S. Senate, SECURE Act 2.0 of 2022, (section 325) https://www.finance.senate.gov/download/retirement-section-by-section-
7 U.S. Senate, SECURE Act 2.0 of 2022, (section 604) https://www.finance.senate.gov/download/retirement-section-by-section-
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