SECURE 2.0 is an expansion of the SECURE Act of 2019. Its purpose is to improve retirement laws on saving accounts and increase retirement planning for Americans of all ages and all stages. While the Act was signed into law on December 29, 2022, the changes that will reflect vary over the coming years but here are a few key points to note for planning over the next few years.

The minimum age for Required Minimum Distributions (RMDs) has been changed from 72 to 73. If you turned 72 in 2022, you would continue receiving your RMDs as planned. If you are turning 72 in 2023 and had previously planned to begin receiving distributions by December 31, 2023, you can postpone those distributions till 2024. Beginning in 2024, Roth Accounts in employer retirements plans will be exempt from RMDs.

Note that, if a tax preferred retirement plan also holds an annuity, previous rules said that the RMD must be split between the two accounts, which usually resulted in an increased RMD amount compared to an individual with only a retirement account. New rules state that an account owner can now aggregate the RMD between the retirement plan and annuity which may eliminate the increase in the RMD.

In 2022 the penalty for not receiving your RMD was 50% of the RMD amount not received. In 2023, that penalty will be reduced to 25% which can be further reduced by electing to receive the entire RMD amount and making the corrections before your timely filed tax return.

The expansion of the IRA Qualified Charitable Distribution (QCD) provision now includes a one-time QCD transfer of up to $50,000 to a Charitable Remainder Unitrusts, Charitable Remainder Annuity trusts, or a Charitable Gift Annuity. Plus, the $100,000 annual QCD limit from IRAs will now be indexed annually to adjust for cost-of-living increases.

And, speaking of indexing for inflation, beginning in 2024 catch up contributions, currently limited to $1,000 if you are 50 years or older, will now be indexed for federal cost of living increases. And, speaking of catch-up contributions, in 2025 taxpayers aged 60 to 63 will be able to make catch-up contributions to their workplace plan for up to $10,000; however, if you are 50 years or older and make more than $145,000 in 2024, all contributions will be required to be made to a Roth account using after tax dollars.

Here’s a few more key points we want to bring to your attention:

• Beginning in 2024, Employers will be able to make matching contributions to retirement accounts for qualified student loan payments.
• Beneficiaries will be able to roll over up to $35,000 of a 529 savings plans into a Roth IRA only if the 529 account has been open for more than 15 years.
• Employers adopting new 401K ad 403(b) plans can offer automatic enrollment to eligible employees at a minimum rate of 3%.
• A new “Savers Match Credit” will replace the non-refundable credit for contributions to an IRA. The credit will be paid in cash and directly deposited into an IRA or retirement plan. This credit offers a 50% match, up to $2,000 per taxpayer, and phases out between $41,000 and $71,000 for married filing jointly, and $20,500 and $35,500 for single filing taxpayers.

Polk & Associates

Large enough to serve a diverse clientele, yet small enough to maintain a hands-on approach, we are committed to maintaining the highest accounting and ethical standards with continuous education, extensive research resources, and excellent quality control.

Polk and Associates is a member of the Michigan Association of Certified Public Accountants, and the American Institute of Certified Public Accountants. The firm participates in the AICPA Peer Review Program, and has always received the highest level of award for its audit practice and quality control.