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SEP Roth IRA + SIMPLE Roth IRA UPDATE 2023 // Secure Act 2.0

Individual retirement accounts (IRAs) are a popular way for individuals to save for retirement while enjoying tax advantages. Among the various types of IRAs, the SEP Roth IRA and SIMPLE Roth IRA have gained attention for their unique features and benefits. As we enter 2023, it’s important for investors to stay abreast of any updates or changes to these retirement vehicles, especially in light of legislative developments such as the Secure Act 2.0.

SEP Roth IRA and SIMPLE Roth IRA are both designed to provide small business owners and self-employed individuals with options for saving for retirement, while also allowing for tax-free withdrawals in retirement. These plans have been particularly appealing due to their simplicity and flexibility in terms of contribution limits and employer matching contributions.

The Secure Act 2.0, which was signed into law in late 2022, introduced several key changes to retirement savings plans, and has implications for SEP and SIMPLE Roth IRAs. One of the most significant changes is the increase in the age for required minimum distributions (RMDs) from 72 to 73, allowing individuals to keep their retirement funds invested for a longer period of time before being forced to withdraw them.

Moreover, the Secure Act 2.0 has also expanded access to employer-sponsored retirement plans, including allowing long-term part-time workers to participate in 401(k) plans. This could potentially impact small business owners who previously relied on SEP and SIMPLE plans to provide retirement benefits to their employees.

It’s important for individuals and business owners who currently have SEP or SIMPLE Roth IRAs to stay informed about how these changes could affect their retirement planning. One potential impact is that the increased age for RMDs may lead some individuals to reassess the timing and amount of their withdrawals during retirement.

Furthermore, the expanded access to employer-sponsored retirement plans may prompt small business owners to reconsider their retirement benefit offerings, and determine whether traditional 401(k) plans or other options may now be more suitable for their employees.

As we look ahead to 2023 and beyond, individuals and business owners should consult with financial advisors to understand the full impact of the Secure Act 2.0 on their retirement plans, and to explore potential adjustments or alternatives that may better align with their long-term financial goals.

In conclusion, the SEP Roth IRA and SIMPLE Roth IRA continue to be valuable retirement savings tools for small business owners and self-employed individuals. However, the recent passage of the Secure Act 2.0 has introduced changes that could impact these plans, and it’s crucial for investors to stay informed and seek professional guidance to make informed decisions about their retirement planning in 2023.