This new law that was part of the Omnibus budget bill, known as Secure 2.0, has significant benefits for IRA and 401k investors. Here’s a quick list of changes.
Simple and SEP Roth IRAs
401(k) Employer/matching contributions can be Roth
No RMD on Roth 401(K)s starting in 2024
Unused 529 Plan Funds can roll to Roth IRA (must have had for 15 years, max of $35K)
RMD goes from 72 to 73 in 2023 and then 75 in 2033
Bigger Catch-Up for those 60-63 – goes from $6,500 to $10,000 starting in 2025 (must be Roth if make over $145K)…(read more)
LEARN MORE ABOUT: IRA Accounts
CONVERTING IRA TO GOLD: Gold IRA Account
CONVERTING IRA TO SILVER: Silver IRA Account
REVEALED: Best Gold Backed IRA
The new year has brought some major changes to Individual Retirement Accounts (IRAs) and 401(k)s, courtesy of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was signed into law in December 2019.
The SECURE Act has several provisions that will impact retirement savings for millions of Americans. One of the most significant changes is that the age for Required Minimum Distributions (RMDs) has been raised from 70 ½ to 72 years old. This means that individuals who turn 70 ½ after December 31, 2019, will not have to take RMDs until they are 72. The hope is that this will give individuals more time to save for retirement.
Another major change to IRAs and 401(k)s is the removal of the age limit for contributions. In the past, individuals could not contribute to a Traditional IRA after the age of 70 ½, but now there is no age limit. This means that individuals can continue to contribute to their retirement accounts as long as they have earned income.
Additionally, the SECURE Act creates a new type of IRA called the “Long-Term, Part-Time Employee” IRA. This IRA allows employees who work at least 500 hours for three consecutive years to participate in their employer’s retirement plan. Previously, employees who worked less than 1,000 hours per year were not eligible to participate in their employer’s retirement plan.
Another change that will impact inherited retirement accounts is that beneficiaries will now have to withdraw all of the funds in an inherited IRA within 10 years of the account owner’s death. This change will not apply to surviving spouses or individuals who are disabled or chronically ill.
Aside from the SECURE Act, the recently passed budget law also contains provisions that will impact retirement savings. One provision is the repeal of the “stretch IRA” for non-spouse beneficiaries. This means that beneficiaries of inherited IRAs will now have to withdraw all of the funds within 10 years of the account owner’s death. However, this change will not apply to surviving spouses, individuals who are disabled or chronically ill, or beneficiaries who are not more than 10 years younger than the account owner.
In summary, the SECURE Act and budget law have brought significant changes to retirement savings accounts. Although some of the changes may be challenging for beneficiaries, the increased flexibility and new opportunities for retirement savings are a welcome benefit for many Americans. It is important to speak with a financial advisor to review your retirement plan and determine how these changes may impact your financial goals.
Someone mentioned that Secure Act made transactions with siblings prohibited. Is this true?
If i have a solo 401k set up under my llc and contributed $20,500 ( employee ) for 2022 but get 1099 for my gig/side hustle, does that mean I have to file a w2 for all my 1099 gig profit under my llc to claim the 25% employer contribution by Jan 31st deadline?
Is Roth for employer match mandatory? My 401k plan is junk, they won't do anything employee-centric like that unless forced to.
I hope someday they'll make in-service rollovers and in-plan conversions mandatory features of 401ks. I don't know why they haven't yet.
Anyone born after Jan 1 1951 will never have to take an RMD. They'll just push it out, push it out.
They want your funds to stay in the market.
Excellent, digestible summary. Thank you
i'm assuming that my gov. thrift savings plan will let me put my matching funds into a roth tsp? if so how long before this might happen?
Mat, one ROTH 'oddity' that I did not hear you mention is the restriction on 'rolling/transferring' an existing ROTH IRA over to a ROTH SOLO401K account. If I remember right that was about one of the only type of account to account transfer you could NOT do.
Is that changed, and what about the ability of doing ROTHs in more KINDS of accounts now – will the ROTH version of say a SEP or SIMPLE have similar restrictions on it also IF that is still in place? IF that restriction is gone, alleluia! – when can I do it? 🙂 Thanks, long time customer Dan
So the employee match can now go to Roth. Do you have to specifically state that or , will it go automatically if you are contributing to the Roth 401K?
These aren’t drastic changes! Simple/SEP Roth options don’t affect a lot of people. Most small business owners usually either want tax deductions or they don’t have enough employees who contribute to the retirement plan. No RMD on Roth 401k is not a big deal either because you can just rollover Roth 401k to Roth IRA to avoid RMD. You would most likely do that because more investment choices in Roth IRA than Roth 401k. RMD not a big deal either oh one more year to age 73 and not 75 until 2033!! Ohh and wow up to $35k Max you can transfer to Roth IRA!!
Does the Roth rollover apply to 529A (ABLE) plans too?
Thanks for the update Mat ‼️ Never thought at 24 I'd be so excited about retirement accounts lol.
Can't wait for the podcast! Thanks Mat!
Are Roth 457b & 403b also exempt from RMDs?