Written By: Shawn Perkins, CFP®, AWMA®

Back in 2019, before your travel plans were up-ended and you began baking sourdough bread while confined to your home, there was a significant change to the retirement planning community called the Setting Every Community Up for Retirement Enhancement Act, or SECURE Act for short. This legislation brought about a variety of changes. Most notably the change in the Required Minimum Distribution age from 70.5 to 72 and the unfortunate death of the Stretch IRA. Well, back for an encore, Congress has enacted the sequel to the SECURE Act dubbed the SECURE Act 2.0. Only this time, it packs in nearly 100 changes! Let me save you the time on this exhilarating drama and give you what we believe are a few key takeaways. 

• The Required Minimum Distribution (RMD) age has been pushed to age 73 for anyone turning 73 between 2023 and 2032. If you turn 73 in 2033 and beyond, your RMD age is now 75. This gives you a little more time for proactive tax planning strategies such as Roth conversions or Qualified Charitable Distributions (QCD). 
• The penalty for failing to take your RMD has been reduced from 50% to 25% of the failed amount. Furthermore, if you can correct the error during the “Correction Window,” which is likely a multi-year period, the penalty is reduced from 25% to 10%. 
• Effective in 2024, the owner of a 529 College Savings Plan will be able to transfer those assets to a Roth IRA in the name of the beneficiary of the 529, if certain rules are met: 
  • The 529 must be at least 15 years old, 
  • Transfers are limited to annual IRA contribution limits, 
  • Maximum lifetime transfer amount to one beneficiary is $35,000 
• Effective in 2024, if you make more than $145,000 in wages (individual W-2 income) you will not be able to make pre-tax catch-up contributions to your employer retirement plan. These contributions will have to be made to the Roth option of your employer plan if a Roth option is available. 
• Sticking with catch up contributions, beginning in 2025, between the ages of 60 and 63, your catch-up contribution limit will increase to $10,000 to an employer retirement plan.

There are quite a few more new characters in this tale that we don’t have the time or space to include, but returning are a few of our long-time favorite characters. Notably: no changes were made to the ability to make backdoor Roth contributions or the ability to complete or limit Roth conversions, as well as the ability to make Qualified Charitable Distributions beginning at age 70.5. 

We will continue to monitor and provide insight on these topics and more, but as always, we’re here to help you navigate the never-ending story of retirement planning.

This week in history

1835 – The national debt reaches $0 for the first time, a goal set by President Andrew Jackson to pay off the nation’s entire debt. 

1989 –Ronald Reagan gave his farewell address after serving eight years as President of the United States.  

2001 – Apple launched iTunes.

2007 – The iPhone was unveiled by Apple CEO Steve Jobs.

If you have any questions, we’d love to chat! Call us at 844-CARLSON (844-227-5766) today!