SECURE Act 2.0 – How new retirement rules may impact you

As of Dec. 29, 2022

A new law known as the SECURE Act 2.0 of 2022 (SECURE 2.0) intends to enhance retirement savings opportunities for Americans. The legislation—which was passed as part of the Consolidated Appropriations Act of Fiscal Year 2023—includes dozens of provisions that will impact investors who have IRAs and employer-sponsored plans, such as 401(k)s.

Your Ameriprise financial advisor will work with you to help make the most of the new rules as part of your retirement strategy.

Here is a summary of key provisions:

1. Increases RMD age to 73 in 2023 and 75 in 2033

The legislation increases the required minimum distribution (RMD) age to 73 beginning in 2023 for individuals who turn 72 after 2022. The RMD age will increase to age 75 beginning in 2033.

2. Requires catch-up contributions to be made as Roth contributions using after-tax dollars

Effective in 2024, catch-up contributions for participants aged 50 or older must be made on a Roth basis under 401(k), 403(b), and governmental 457(b) plans. However, the requirement applies only if the employee’s prior-year wages from the employer sponsoring the plan exceed $145,000 in the previous taxable year. The option to make pre-tax catch-up contributions will continue in 2023.When deciding whether to make pre-tax or Roth contributions for 2023, consider that your future catch-up contributions will have to be Roth contributions if you earn more than $145,000. 

3. Allows 529 assets to be transferred to Roth IRAs beginning in 2024

Beginning in 2024, beneficiaries of 529 plans that have been in place for 15 years or more can transfer assets from the 529 plan to a Roth IRA. The transfer is subject to the beneficiary’s annual contribution limit and up to a lifetime maximum of $35,000.

This provision may alleviate a parent’s potential concern that they are over-funding a 529 plan. For example, if a child qualifies for scholarships, or school expenses are less than anticipated,  leftover 529 amounts could be transferred to the beneficiary’s Roth IRA.

4. Raises limits on catch-up contributions for those ages 60 – 63 in 2025

Effective in 2025, the new law expands catch-up contribution limits for employees who are ages 60 – 63 and participating in certain employer-sponsored retirement plans.

The catch-up amount will increase to the greater of $10,000 or 150% of the normal catch-up limit for 401(k), 403(b) and 457(b) plans. The catch-up limit for SIMPLE IRAs and SIMPLE 401(k) plans will increase to the greater of $5,000 or 150% of the normal catch-up limit. These amounts will be adjusted for inflation beginning in 2026. These catch-up contributions will be subject to the Roth requirements described in Section 2 above.

We can help you make sense of the new rules

How might these changes affect you and your retirement strategy? An Ameriprise financial advisor can help you understand what the SECURE Act 2.0 means for you and provide personalized advice to help you meet your retirement goals.