Throughout the SECURE 2.0 bill, there are many hidden gems that, if fully understood, can be used to help optimize your financial future. Here are the top takeaways.
Required Minimum Distributions (RMDs)
- Beginning in 2023, the RMD age is raised to 73. Note that if you are currently subject to RMDs under the old RMD rules, you are not impacted and must continue to follow the existing RMD schedule.
- In 2033, the RMD age will increase again to 75.
- This provision benefits those who don’t need distributions and clears the way for another year of Roth conversions without worrying about RMDs getting in the way.
Retirement Plan Contributions
- Beginning in 2023, SEP & SIMPLE plans can allow for Roth contributions.
- Plans can allow employer contributions to be made on a Roth basis.
- For plans with the Roth option, catch-up contributions for high-wage earners age 50 or over are required to be Roth beginning in 2024.
- Starting in 2025, individuals aged 60-63 will be eligible to make more significant catch-up contributions.
529 to Roth IRA Rollover
- For certain 529 accounts which were maintained for at least 15 years, the account owner can transfer funds to a Roth IRA beginning in 2024.
- Contributions and earnings from the past five years cannot be transferred.
- There is a lifetime transfer limit of $35,000, and the annual transfer limit is equal to the Roth IRA contribution limit.
While there are many planning opportunities created by SECURE 2.0, there are also many nuances to watch for. Be sure to talk with a knowledgeable financial advisor before making any decisions.
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