The Secure Act 2.0 is a new retirement plan legislation aimed at addressing America's retirement crisis. Only a small percentage of non-retirees have any retirement savings, and even fewer feel their savings are on track.
The new law introduces various provisions to improve retirement outcomes. Here are the five most important changes:
Better Catch-Up Contributions: For individuals aged 50 or older, catch-up contributions allow them to save more in retirement accounts like IRAs and 401(k)s. Secure Act 2.0 increases the limits for catch-up contributions and adjusts them for inflation.
Changes to RMDs: Required Minimum Distributions (RMDs) force individuals to withdraw money from pre-tax retirement accounts and pay income tax on it. The new law adjusts the age when RMDs begin based on the individual's birth year, offering more flexibility.
Automatic 401(k) Enrollment: New retirement plans will automatically enroll employees in a 401(k) with a default contribution rate, encouraging more people to save for retirement.
401(k) Emergency Distributions and Emergency Funds: The law allows penalty-free emergency distributions from retirement accounts up to $1,000, but the amount may not be sufficient for many emergencies.
529 to Roth IRA Conversions: The law allows converting up to $35,000 from a 529 education savings plan to a Roth IRA penalty-free. This makes 529 plans more appealing as a long-term investment option.
The law also includes other changes, such as performance benchmarks for target-date funds, automatic 401(k) transfers for job hoppers, employer match for student loan payments, the option for Roth employer matches, and the elimination of RMDs for Roth 401(k) contributions.
These reforms aim to help people save more for retirement, make retirement accounts more accessible, and improve financial security for future retirees.
To read the entire article click here: Forbes Secure Act Article: https://www.forbes.com/advisor/retirement/secure-act-2/
To see how we may be able to help you navigate these significant changes and take advantage of the new rules, contact us at 415-506-4569 or email at info@alphawmp.com
Andrei Jigalin, CFP®
Financial Advisor