Posted by John Posey
Below I have highlighted some of the changes resulting from the legislation passed last December called the SECURE Act 2.0. One of the noteworthy changes effective in 2023 is the new required minimum distribution (RMD) age which is as follows:
- If you were born before 1951 – No Change, RMDs as usual
- If born between 1951-1959 – RMD age pushed back to age 73
- If born 1960 or later – RMD age pushed back to age 75
Here are a few other unique tidbits:
- Roth Simple IRA and Roth SEP IRA accounts – Starting in 2023, investment custodians will begin offering these new account registrations.
- 529 Plan to Roth IRA Transfers – Effective 2024, it is anticipated that 529 plan beneficiaries will be eligible to transfer their 529 funds to a Roth IRA subject to the annual IRA contribution limit and maximum lifetime transfer of $35k per beneficiary assuming the 529 plan has been maintained for 15+ years. I expect more guidance to come on these rules in the coming year – could be a great opportunity for some.
- Older Spouse Beneficiary Option – Effective 2024, a surviving spouse beneficiary that is older than their deceased spouse may consider electing the deceased spouse’s retirement plan as the decedent (ie – start taking RMDs based on when the original owner would have needed to take them) in efforts to reduce RMDs.
- Penalty for Missed RMD Reduced – Effective 2023, the penalty for a missed RMD is reduced from 50% to 25% - penalty is further reduced to 10% if fixed during a “Correction Window”. The best strategy is to not miss them – it can be automated annually!
- Increased 401(k) & Simple IRA Limits in 2025 – This one is quite unique. Applicable only to participants turning 60 – 63 during the calendar year starting in 2025, you will have the ability to make a catch-up contribution limited to $10k for 401(k)s - $5k for Simple IRAs OR 150% of the standard catch-up dollar limit in that corresponding calendar year (ie – 150% of 2023 401(k) catch-up of $7,500 = $11,250). In short, if you have a 401(k) or Simple IRA and you are between the ages of 60-63 in year 2025+ you need to consider this a possibility to increase your retirement account contributions. FYI - Once you reach age 50, catch-up contributions are offered beyond the standard contribution limits.
These are just a few of the highlights I found to be relevant for many. For a more comprehensive list of SECURE Act 2.0 changes and opportunities, review Jeff Levine’s article at Kitces.com.
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