Understanding the Tax Changes from SECURE 2.0 

Recognized as one of the most sweeping changes to retirement planning in the past decade, tax changes from legislation known as “SECURE Act 2.0” began to take effect in 2023. While some changes won’t be implemented until 2025, it’s important to understand how these changes could impact you no matter where you’re at in life.  

• Updates to help you prepare for the unexpected. Beginning this year, two key updates that can help you manage emergency situations: individuals can withdraw up to $1,000 from their retirement savings each year to cover personal or family emergencies penalty-free, and employers can offer automatic enrollment in an emergency savings account of up to $2,500 linked to your retirement plan. 
• Increases to “catch-up” contributions limits to help fund your retirement. “Catch-up” contributions are additional payments to retirement accounts made after the age of 50, and SECURE 2.0 is increasing the maximum amount that can be contributed each year.   
• Employer contributions to fund retirement while paying off student loans.  Beginning this year, employers can match contributions for qualified student loan payments to 401(k), 403(b), or SIMPLE IRA plans to help student loan borrowers to build their retirement savings while also paying down their student debt. 
• Increasing the age for Required Minimum Distribution (RMD). Starting on January 1, 2023, SECURE 2.0 increased the age required to start withdrawing your RMD from 72 to 73 years-of-age and lowered the penalty from 50% to 25% of your required withdrawal amount. The legislation also dictates that the age will change from 73 to 75 beginning in 2033. 
• Give more to your favorite charity through Qualified Charitable Distribution (QCD). Beginning at 70.5, you can start donating funds directly from your IRA, 401(k), or other qualified retirement plan to qualifying charities. Beginning this year, SECURE 2.0 raised the QCD limit to $105,000, and will adjust it annually for inflation. 

• Beginning in 2025, employees will be enrolled in employer retirement plans. Under the new act, employers will be required to automatically enroll employees in any new 401(k) or 403(b) retirement plans created after December 31, 2024, helping more people save for their retirement.    

To fully understand how these and other retirement planning changes made through this legislation, contact your employer, retirement account provider, or financial advisor.