Klingman & Associates, LLC

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Klingman Insights

Key Aspects of the SECURE 2.0 Act
January 13, 2023

Just before the calendar turned, on December 29th, the SECURE 2.0 Act became law. Building on changes made in 2019 under the original SECURE Act, this law increases contribution limits, introduces more after-tax saving strategies, and indexes several limits to inflation. Here are some highlights of the bill:

Required Minimum Distributions (RMDs):

  • RMD age has increased to 73 for anyone turning 73 after Jan 1, 2023. This increases to 75 on Jan 1, 2033.
  • In 2023, the penalty for missing an RMD will be lowered to 25% of the amount not taken, down from 50%. The penalty is further reduced to 10% if the IRA owner corrects their mistake and files a corrected tax return.

No action is needed on your part as we will coordinate any impact of these changes on your accounts/distributions.

Traditional Retirement Plan Contributions (401(k), 403(b), 457(b)):

  • Roth 401(k) accounts will not have required minimum distributions starting in 2024.
  • Employer matching contributions can now be Roth contributions (using after-tax dollars).
  • Beginning in 2024, anyone earning over $145,000 will be required to make Roth contributions (after-tax dollars) for their catch-up contributions after age 50.
  • Employers will be able to contribute into an employee’s account to match that employee’s student loan payment, starting in 2024.
  • Those between the ages of 60-63 will have a 50% higher catch-up limit, starting in 2025. Current limit is $6,500.

Please reach out to your employer to discuss adjusting contributions made to your retirement account.

529 Account Transfers to Roth IRAs:

  • So long as the 529 account has been maintained for at least 15 years, up to $35,000 can be transferred into a Roth IRA account for the same beneficiary (subject to other contribution limits)

We will reach out to you if we believe this strategy makes sense for you to explore.

SIMPLE IRAS/401ks, SEP IRAs, Solo 401(k)s:

  • It is now possible to open and contribute to SIMPLE Roth and SEP Roth accounts.
  • SIMPLE IRA and SIMPLE 401(k) contributions will increase by 10%, including catch-up contributions, starting 2024.