On Thursday this week, President Biden signed into law a $1.7 trillion omnibus spending bill . Of particular note to investors was the inclusion of the SECURE 2.0 Act (an expansion of the 2019 Setting Every Community Up for Retirement Enhancement Act). Two key provisions concerning IRA, 401K, and other qualified retirement plans were included in the act:
Required Minimum Distributions (RMD) – Prior to the 2019 CARES Act, RMDs were required to begin at age 70 1/2. The 2019 act raised the beginning age to 72. Starting on January 1, 2023 (tomorrow), the RMD beginning age will be raised to 73. The beginning age increases again to 75 in 2033 (10 years from now). These changes help those not ready to withdraw funds from their plans at age 72. An additional year of potential investment growth and tax benefits before making withdrawals can improve the financial life of plan participants.
IRA/401K Contribution Catch-Up Limits – This affects participants of all qualified plans starting in 2025 (2 years from now). Currently, beginning at age 50, participants in Traditional and Roth IRA, 401K, 403B, 457, and other qualified retirement plans are allowed to make higher contributions to their plans in excess of the normal limits for younger participants. This is referred to as a catch-up election. Under the new law, additional increases in catch-up election contribution limits will affect participants at ages 60 – 63. This will allow savers to not only increase their plan contributions above the normal plan limits beginning at age 50, but at ever higher limits at ages 60, 61, 62, and 63 as they move closer to retirement.
Noel R. Vincent
More on this topic in later posts…
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