{"id":11725,"date":"2023-03-04T22:52:06","date_gmt":"2023-03-04T22:52:06","guid":{"rendered":"https:\/\/udirectira.com\/?p=11725"},"modified":"2023-07-18T16:51:31","modified_gmt":"2023-07-18T16:51:31","slug":"how-the-secure-act-affects-retirement-accounts","status":"publish","type":"post","link":"https:\/\/udirectira.com\/how-the-secure-act-affects-retirement-accounts\/","title":{"rendered":"How the SECURE Act Affects Retirement Accounts"},"content":{"rendered":"
The Setting Every Community Up for Retirement Enhancement Act of 2019, also known as the SECURE Act, was passed by Congress and signed into law on December 20, 2019. The Act brought significant changes to retirement accounts, and now, lawmakers have an update to the legislation with SECURE Act 2.0. In this article, we’ll explore how the SECURE Act 2.0 further affects retirement accounts.<\/p>\n
First, let’s review the changes made by the original SECURE Act. One of the most significant changes was the elimination of the age limit for traditional IRA contributions. Previously, individuals over the age of 70 \u00bd were prohibited from contributing to traditional IRAs, but under the SECURE Act, anyone with earned income can contribute to a traditional IRA, regardless of age.<\/p>\n
Another significant change was the increase in the required minimum distribution (RMD) age from 70 \u00bd to 72. This change allows retirees to delay taking distributions from their retirement accounts, which can help them manage their tax liability.<\/p>\n
The SECURE Act also introduced new rules for inherited IRAs. Previously, beneficiaries of inherited IRAs could stretch out distributions over their lifetime, but under the new law, most beneficiaries are required to withdraw the entire balance within 10 years. There are some exceptions to this rule, such as for spouses, minor children, and disabled individuals.<\/p>\n
December 29, 2022, President Biden signed into law the SECURE 2.0 Act of 2022 (the Act) as part of the Consolidated Appropriations Act, 2023.<\/p>\n
So, how does the SECURE Act 2.0 impact retirement accounts? One of the main changes is an increase in the RMD age from 72 to 73 beginning January 1, 2023. This change allows retirees to defer distributions for an additional three years from the 2019 requirements and as a result, gives savers more time to grow their retirement savings.<\/p>\n
The SECURE Act 2.0 also increases the catch-up contribution limits for 401(k) plans for individuals over the age of 50. Currently, there is a catch-up provision allowing workers aged 50 or older to contribute additional funds to their 401(k), 403(b), or other qualified retirement plan. In 2023, the catch-up increased to an additional $7,500 on top of the $22,500 annual federal limit for a total of $30,000 for the year.<\/p>\n
Starting with the passage of the Secure Act 2.0, employers no longer have to use pre-tax dollars to match the contributions of 401(k) participants. They will have the option to make Roth matching contributions.<\/p>\n