Secure 2.0 Act of 2022 Bullet Points
Here is what you need to know about the Secure Act 2.0, RMDs, and how you could be affected.
Changes to Age Requirements:
The Secure Act 2.0 raises the age again, after the original Secure Act of 2019 raised the age, that retirees are required to take RMDs (required minimum distributions.) Starting January 1, 2023, you may now wait until 73 as opposed to the previous age of 72. The age will increase again in 2033 to 75.
Why does this matter?
This increases the amount of time you get to take advantage of the tax benefits IRAs offer.
Changes to Penalties
Additionally, the penalties associated with not taking the RMDs is decreasing from 50% to 25% of what should have been withdrawn. And there is now a ‘correction window’. So, if you make a correction within the allowed time frame, the penalty decreases further to only 10%.
Changes to ROTH IRAs
This change eliminates the need to take RMDs from ROTH IRAs from certain qualified employers. This does not affect everyone, however, so if you have a ROTH IRA, let’s talk and see if you are impacted by this change.
Changes to Catch-up Contributions
For people aged 60-63, the ‘catch-up’ contribution limit on 401(k)s and 403(b)s will increase from $7,500 annually to $10,000 annually beginning in 2025.
For those 50 and older who have IRAs, the catch-up contribution limit (currently at $1,000 annually) will be indexed based on inflation. Translation: As cost-of-living increases, your contribution limit could increase as well.
This scratches the surface of what you need to know, and it should be noted that these are simplified explanations of complicated laws. So, if you have questions on this or anything else related to your finances, retirement, or laws, please don’t hesitate to reach out; we are happy to help!
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