New Rules for Retirement – The SECURE Act 2.0
The Setting Every Community Up for Retirement Enhancement Act of 2022 (SECURE Act 2.0) was passed in late December, 2022, and it aims to make retirement saving more accessible and more secure for individuals. This comes after the SECURE Act 1.0 of 2019 that passed, delaying RMDs from age 70 ½ to age 72, among many other new provisions.
Here are some of the latest tax law changes for retirement:
- Required Minimum Distributions (RMDs) begin at age 73 and will start at age 75 beginning in 2033. (You can still take out from your IRA as early as age 59 ½)
- The what-used-to-be 50% penalty for missing an RMD is now only 25%. And if you catch the error within a reasonable time, the penalty is just 10%. (No more are the days of 50% penalty)
- More flexible rules on Inherited IRAs for surviving spouses who inherit retirement accounts from a younger spouse. (Think better for the widow or widower)
- Increased employer retirement plan catch-up contributions for participants in their early 60s. (This means more money and more tax savings too!)
- Retroactive First-Year Solo-401(k) plan deferrals allowed for sole proprietors. (High earners paying too much tax can now take advantage of another strategy)
- IRAs now allow 50 and up who separated from service (firefighter, public safety officer) to withdraw early and avoid 10% penalty. (Thank you for your service, I guess the IRS agrees)
The SECURE Act 2.0 is a great reminder that retirement saving and planning can be complex, but these new laws are designed to help make it easier for everyone to save for the future. Whether you are just starting out or winding down your career, make sure to take advantage of these changes in your individual retirement plan where possible. Even earning just an additional 1-2% per year through tax planning, budgeting, and investing will make a huge difference over 10+ years.
Have any questions? Call today! 817-238-6300
Happy Retirement Planning!
Matt Ward, CFP®
New Century Investments