This recorded webinar provides a mid-year SECURE Act 2.0. update for 2023 and a detailed overview of the changes brought about by the Act. These changes impact required minimum distribution (RMD) rules, contributions, and overall enhancements to retirement plans, which include self-directed accounts. The session also touches on how the new laws affect tax strategies and the upcoming implementations of the SECURE Act 2.0 scheduled for 2025. You’ll also learn there are some areas of the Act that need further clarification and guidance from the IRS.
These changes impact all Americans. We encourage you to listen to the recorded version of this webinar or have a glance at the highlights provided below.
Webinar host: Alex Perny, business development specialist at Advanta IRA
Secure Act 2.0 Update 2023 Insights
- The Secure Act 2.0 brings several changes to retirement plans, including changes to IRA RMDs and contribution amounts.
- Roth 401(k) plans now align with Roth IRAs in terms of minimum distribution rules.
- There is uncertainty around the implementation of new contribution changes due to a lack of guidance from the IRS.
- Starting in 2025, individuals aged 60-63 will be allowed to contribute an additional $10,000 as a catch-up contribution per year, per individual to their retirement plans with no phase-out for high-income earners.
- The Act allows automatic enrollment for all eligible participants in 401(k) plans starting at a 3 percent contribution per year.
- Solo 401(k) plans for single-member LLCs and sole proprietors now have more flexibility in making elective deferrals.
- As of this SECURE Act 2.0 update, there are still some uncertainties and areas awaiting guidelines from the IRS.
Top SECURE Act 2.0 Update Highlights
Significant changes introduced by the Secure Act 2.0
- The shift of required minimum distributions (RMDs) to begin at age 73 for any pretax account
- Reduced penalties for failing to take an RMD
- The allowance of Roth 401(k) plans to follow the same RMD rules as a Roth IRA
- Ability to self-certify hardship withdrawals from 401(k) plans
- A forthcoming creation of a ‘lost and found’ network to help taxpayers find old employer plans
Increase in Catch-up Contributions Beginning in 2025
Beginning in 2025, individuals aged 60 to 63 will be allowed to contribute an additional $10,000 per year per individual. That means if both you and your spouse are 60 in the year 2025, you can make an additional $20,000 per year of annual contributions to an IRA.
Roth Contribution Allowances for Some Retirement Plans
Alex explains the potential for after-tax Roth contributions to retirement plans, including SEP IRAs and SIMPLE IRAs, and solo 401(k) plans. However, he noted the IRS has not provided clear guidance on reporting these contributions. “For example, while you now are under no obligation to have to make the contribution after tax and then perform an in-plan conversion for a solo 401(k), we don’t exactly know how you’re going to report that to the IRS that you made an after-tax contribution.”
529 Plan Balances Can be Rolled into a Roth IRA
Thanks to the SECURE Act 2.0, unused 529 plans can be rolled into a Roth IRA if the plan is over 15 years old. That’s a big benefit, especially with more of the population seeing the advantages of alternative plans rather than going to a traditional four-year college,” Alex explained.
The Bottom Line
Alex points out the considerable uncertainties remaining due to the lack of guidance from the IRS. “What I want people to take away from this SECURE Act 2.0 update is that if you were planning on using some of these new strategies, seek professional guidance to ensure you follow forthcoming IRS clarifications on the details.”
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