The Secure Act 2.0 signed a lot of changes into law that impact retirement savings and withdrawal rules. However, because so many people in their 50s and 60s wish they had more money in the ROTH accounts, I’ll focus on what the changes mean to ROTH IRAs and a few ways you might be able to get more into those accounts.
Dave Zoller, CFP®
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The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 has recently made significant changes to retirement and Roth accounts, significantly impacting retirement planning for individuals. These changes have been designed to address the evolving retirement landscape and provide more flexibility for individuals to save and plan for their future.
One of the most notable changes brought forth by SECURE Act 2.0 is the increase in the age for required minimum distributions (RMDs). Under the previous regulations, individuals were required to start taking RMDs from their retirement accounts at the age of 72. However, the new law raises the age to 75, allowing individuals to keep their funds invested for a longer period of time, potentially maximizing their growth and extending the longevity of their savings.
Another important change relates to contributions to traditional Individual Retirement Accounts (IRAs). Previously, individuals were unable to contribute to their traditional IRAs once they reached the age of 70 and a half. However, SECURE Act 2.0 has removed this limitation, allowing individuals to continue contributing to their traditional IRAs for as long as they are working.
Additionally, the legislation introduces an auto-enrollment requirement for certain retirement plans. Employers providing 401(k) plans with automatic enrollment features will now be required to automatically enroll eligible employees unless the employee opts out. This change will help increase retirement plan participation rates and ensure that more individuals have access to retirement savings opportunities.
SECURE Act 2.0 also aims to expand access to employer-sponsored retirement plans for small businesses. The legislation includes provisions that enable small businesses to collaborate and pool resources to provide retirement plans for their employees, reducing the costs and administrative burdens associated with offering such plans. This change will help extend retirement savings opportunities to a larger number of individuals working for small businesses.
In relation to Roth accounts, the new law has expanded options for Roth contributions. Individuals can now contribute to Roth accounts through their employer-sponsored retirement plans, such as 401(k)s and 403(b)s, regardless of their income level. This change allows higher-income individuals to take advantage of the tax-free growth and tax-free withdrawals associated with Roth accounts, providing more flexibility in retirement planning and tax management.
SECURE Act 2.0 also introduces a provision aimed at encouraging employers to offer lifetime income options within their retirement plans. This provision helps individuals better plan for lifetime income by providing them with access to annuities and other similar options that can help guarantee a steady stream of income during retirement.
Overall, the SECURE Act 2.0 has made important changes to retirement and Roth accounts, prioritizing increased flexibility, access, and planning options for individuals. These changes reflect the evolving retirement landscape and aim to ensure that individuals are better equipped to save, plan, and navigate through retirement with enhanced financial security. Advisors and individuals alike should carefully study these changes and adapt their retirement planning strategies accordingly to make the most of these new provisions.
One of the things I love about roth is that in actuality it increases the amount you're putting in to retirement every year. Think about it, maxing your 403b with roth is like putting in an extra $5k per year into your retirement. That adds up quick.
I have an appointment to meet with a local financial planner this Thursday, but when I saw their form where I have to list all my assets, insurance, etc. for the meeting, I suddenly started feeling overwhelmed and uncomfortable. Do most financial advisors want to see a prospective client's information at the first meeting? I know this is not the topic of your video, but I have been binged watching your videos. Thank you.
All your videos are so informative and helpful! Thank you.
Enjoy!
Please cover reducing NESE to prevent reduction in SSA benefits. The only benefit I can see is Home Office Deduction. If you created a fairly good size business space you could reduce your NESE.
Your video is incorrect in respect to the Roth discussion pertaining to the $145,000 rule for catch up contribution. You state that it is based on the value of your Roth account. That is incorrect. It is based on your taxable income for that year. Rule > Effective for tax years beginning after December 31, 2023, SECURE Act 2.0 requires that any retirement plan (except a SARSEP or SIMPLE IRA plan) that permits catch-up contributions must treat any catch-up contributions made by certain “High-Paid Participants” as designated Roth contributions. For these purposes, a “High-Paid Participant” is an employee whose wages (as defined in Internal Revenue Code (Code) Section 3121(a)) from the employer sponsoring the plan during the preceding calendar year exceeded $145,000, as adjusted for cost-of-living increases.
Thanks for this video! It's amazing that since the Act was just passed at the end of 2022 and is now in effect, there are some key changes.
Another scam to enrich Wall Street and investors.
Changes include:
1. Removal of Roth RMDs
2. 529 rollovers to Roth
3. Simple/SEP roth contributions
4. Age 50+ catch up roth contributions
5. Employer match to roth 401ks
Thank you for your insight, may this year be a full of great accomplishments.The secret to wealth is simple you’ve got to start taking steps to achieve your goal.
Essentially, the government is making it easier to pay your taxes NOW rather than later. They need more tax revenue NOW.
They want people to put more money in retirement to prop the market up right now.
I like this video because you are reviewing details not commonly convered in normal media stories of Secure Act 2.0. It's those details that make the difference. Thanks.
They screwed up the details of the law and there is no catch up contributions for 401k in 2024.
More people in their fifties sixties and seventies wish they had more Roth?
Is that because they were in lower tax brackets while working than there effective tax rate in retirement??
Or
Is that because they want there cake and eat it too?(they just don't want to pay taxes)
Is most people in your reference people using a planner such as yourself (say top 10 or 20% of retirement assets) or the general population.
The overwhelming amount of people pay less taxes in retirement
If I said it a 1000 times before, I'll say a 1000 times more… These videos are by far the best ones out there for anyone who is looking for the "best scoop" on a retirement plan. Thank you again Dave. Cheers!
Do you know if employer matches funds to a ROTH will that create a taxable event for the employee?
Good stuff.
Thankful that we have Democratic leaders in place who are focused on creating policies like this for us.
You said if your Roth 401k balance is over 145k then catch-up has to go into Roth 401k instead of pre-tax 401k. Did you mean if your income is greater than 145k?
Catch up contributions are not forced into ROTH. They can go into 401K.
I'm 72, will be 73 this year. I started RMDs in 2022. The new rules are not helping me. And it is expensive, between additional tax and the Medicare premium penalty… If you are younger do Roth if you can.
I enjoyed the video.
I've been advocating the 529 recipient to use it for their (future) children.
Great video
great video. How about Solo 401k ? Did that change?
The new RMD of age 73 in 2023. Actually, it’s better than that if you’re a lot younger.
If you won’t turn age 75 prior to 2033, the RMD now starts at age 75!
But keep mind, the RMD % is actuarially based. So moving the RMD age later, also increases the RMD % at that point.
I'm confused. I thought that the $145,000 threshold that requires catch up contributions must go to a Roth, was based on one's income, and not on how much is already in the account???
I've never liked the 529. It is a great investment vehicle but it is only for college savings, but lots of kids don't go to college. A UTMA is a better vehicle IMHO but you have to trust your kids because it is theirs when they turn 18 or 21 and can be used for college or something totally irresponsible.
Love to hear about positive options to manage my retirement distributions and managing tax burden. Thanks.
I've complained to my senators and representative that catch up contributions are now all Roth in 2024 so taxable at likely the highest tax bracket most will ever be in.
Non-qualified 529 withdrawals – the pain might not be as bad as it appears.
First, the 10% penalty is on the growth of the 529, not the entire amount, including principal (your contributions).
Second, if you’ve been managing your income low enough, pre-Medicare to qualify for the Healthcare Premium Tax Credit, the income tax on withdrawal might be lower than you think since it too is on the growth of the 529… but then you’d have to be careful not to put your Healthcare PTC at risk.
Note, for any partial withdrawal, whether qualified or non-qualified – the principal/contribution and growth portions are pro-rated so the ratio remains the same for the withdrawals as well as the remaining 529 balance.
The 529 to Roth Rollover – parents, this doesn’t help you unless you yourself are the named beneficiary! Your kid or grandkid, the named beneficiary, can roll it over to their Roth IRA.
Heck yes! Your videos are great!
Always informative, thank you for sharing the changes and implications
My plan
Retired at 60, now 62, but still working pt and making enough w2 income to fund or mostly fund my Roth, basically I’m taking from traditional IRA 8000-12000 a year and using to fund Roth and max out my wife’s HSA , which should reduce my RMDs later
Wife is 5 years younger and will retire at 59, we’ll do same with hers as she’ll work pt too
Hopefully pay some now, pay less later. I’m sure the laws will change 8 more times before I’m even at 72/73/75 whatever
For rule 2, 529 to Roth rollover, is this for rolling the 529 to the Beneficiary's (eg. Child's) Roth or my (parent) own Roth?
I find these videos useful. Thank you.
Great video!!