secure act tax prep

Secure 2.0 Overview

On December 29, 2022, President Biden signed into law the Consolidated Appropriations Act, 2023. “SECURE 2.0” is a spending bill intended to make retirement savings more straightforward and more accessible. It includes many aspects of financial planning and promotes retirement savings. This is a high-level summary addressing the items most likely to affect our clients.

Select Features of Secure 2.0

  • Delays the age of RMDs from age 72 to 73, with an eventual increase to age 75 by 2033. Individuals who turned 72 in 2022 should not be affected by this new rule. The imposition of the new RMD age does not seem to afford the individual the option of delaying their first RMD beyond April 1, 2023.
  • Allows employers to provide matching contributions to an employer-sponsored retirement plan equal to an employee’s qualified student loan payments.
  • Authorizes taxpayers to create SIMPLE Roth IRAs and SEP Roth IRAs.
  • Indexes IRA catch-up contributions for inflation year-over-year.
  • Eliminates RMDs for Roth accounts in employer-sponsored plans.
  • Indexes Qualified Charitable Distributions (currently limited to $100,000 per individual) for inflation year-over-year.
  • Permits unused funds remaining in 529 college savings plans to be rolled into Roth IRAs (subject to restrictions, including a lifetime rollover limit of $35,000 and a 15-year minimum on account age).
  • Introduces new post-death beneficiary withdrawal options for surviving spouses of retirement plan owners by permitting the surviving spouse to elect to be treated as if they were the deceased spouse.
  • Adds numerous exceptions to the 10 percent penalty for early withdrawal from a retirement account (exceptions include withdrawals for domestic violence victims and for qualified long-term- care expenses), with each carrying varying limits on withdrawal timing and amount.

Note that some of these provisions will become effective over the next few years and will not be immediately available.

Next Steps

Information continues to become available regarding the interpretation of SECURE 2.0. It’s important to continue to review all aspects of your financial plan and tax strategies to ensure that you understand how you and your family could be affected. Be sure to contact your tax professional or our office for help navigating your situation.

We will share more on the provisions within the bill as information becomes available. If you have any questions about your personal financial and tax plan, contact us at 610-709-5072.