Legislative Updates: SECURE 2.0 Act
By Linda T. Cammuso

Under the SECURE ACT (Setting Every Community Up for Retirement Enhancement Act), which became law in 2020, long-held strategies for estate planning and financial planning were up-ended. Notably, the new law eliminated the ability for most beneficiaries who inherit retirement accounts to “stretch” the taxable distributions over their actuarial life expectancies, as was previously allowed. On a positive note, the law contained favorable provisions for retirement account owners, including removing the age limit for IRA contributions and the age to begin taking required minimum distributions (RMDs) to age 72.

On December 29, 2022, SECURE 2.0 Act was signed into law, providing a slate of changes that are critical to understand as you plan for your retirement or have already retired.

Key changes in the law include:

  • The age to start taking RMDs increased to age 73 in 2023 and to 75 in 2033.
  • The penalty for failing to take an RMD will decrease to 25% of the RMD amount, from 50% currently, and 10% if corrected in a timely manner for IRAs.
  • Effective in 2024, RMDs will no longer be required from Roth accounts in employer retirement plans.
  • “Catch-up” contributions will increase in 2025 for 401(k), 403 (b), government plans, and IRA account holders.
  • Defined contribution retirement plans will be able to add an emergency savings account associated with a Roth account.
  • With regard to charitable planning goals, with retirement assets, people who are age 70 ½ and older may elect as part of their Qualified charitable distributions limit a one-time IRA gift up to $50,000.
  • Beneficiaries of College Savings Plans (529 Plans) may rollover unused plan funds into and IRA starting in 2024.
  • The law also clarified previous ambiguities regarding stretch rules for retirement accounts that are payable to trusts.

These are just a few of the many changes to the law. While maintaining your estate plan has always been important, the SECURE Act legislation and SECURE 2.0 Act laws may warrant special attention and review of your current estate plan. In addition to reviewing estate documents and account designations, account owners should also contact their financial planners to consider lifetime strategies that minimize tax impact to their accounts and future beneficiaries.

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