SECURE 2.0 and Retirement Savings: What Investors Need to Know

Read on for more insights into the SECURE Act 2.0 and retirement savings.

The SECURE Act 2.0 is now law, and the sweeping bipartisan legislation is intended to strengthen the retirement savings system in the U.S. The new law is designed to provide additional paths to better retirement savings, as surveys conducted by the Federal Reserve have found that only 75% of non-retirees in the U.S. have any retirement savings whatsoever, and only 40% feel that their retirement savings are on track.¹ 

What impacts from the law should investors keep in mind? 

• Raises the age for mandatory retirement withdrawals (known as a required minimum distribution, or RMD) to 73 from the current age of 72  
• Creates Roth SEP IRAs, which can be set up by an employer or self-employed person and which permits the employer to make contributions to the accounts of eligible employees 
• More opportunities for “catch up” contributions in retirement savings accounts to make up for years when investors weren’t contributing up to the limits 
• Ability to rollover 529 plans into Roth IRAs if the beneficiary doesn’t use the money for education expenses 
• Allows part-time employees to participate in employer retirement plans 
• Allows up to $2,500 to be withdrawn without penalty to pay for long-term care insurance premiums 
• Expands emergency withdrawal criteria for disaster relief situations, domestic abuse survivors, and terminally ill patients 

There are also some limited-time opportunities for certain investors, including:  

• Pre-tax “catch up” contributions to Roth 401k for high-income earners, which end this year (2023) 
• Roth conversions are now available to those under 73, as they now have more time prior to their mandatory withdrawals starting 
• Parents and grandparents also now have a limited window to overfund their children’s and grandchildren’s 529 plans, as they can be rolled over to Roth IRAs down the road 

For more information about SECURE Act 2.0, check out this recent RMB article. If you have questions about how the changes could impact your retirement plan, be sure to talk to your RMB advisor.