Reviewing Some of the Main Points from the Secure 2.0 Act
January 31, 2023
Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this week. My name is Cody Moore, and I am a Wealth Advisor at Wealth E&P’s Alpharetta, Georgia office.
Today we're going to be going over a few of the main points from the Secure Act 2.0 that was passed into law recently. This has some major implications when it comes to retirement savings plans.
- To start, let’s talk about required minimum distributions or RMDs; those were previously set to be at age 72 in 2022. Moving forward in 2023, that will be moved to age 73 for the required start. If you were born in 1960 or later, it will start at age 75 for the folks in that range. The penalty for failing to take your RMD has previously been 50%, but that will now be at 25%, so we saw a reduction in that as well.
- Second, let’s discuss catch-up contributions. This scenario includes someone being 50 years or older and being able to contribute extra to retirement accounts to help try to fund it as they’re getting closer to it. This currently has been $1,000 for IRAs and $6,500 for your employer plan, 401(k), or 403(b)s. Those numbers are still going to be the same for this year, but going forward, they're going to be tied to inflation and growing in the future.
- Two interesting additions we see as well are going to be for employees and their benefits. Employers will be able to match student loan debt payments as part of their employee benefits. Previously, if you contributed to your Roth 401(k), your employer's match would still go into the pre-tax or the traditional side. Now, with this new tax law, that will be able to be contributed to the Roth portion of your account.
So, there is a lot of complexity to these tax laws; it was an over 4,000-page document. If you've got any questions about how this is going to impact your portfolio, if you would like a second opinion on your investments, want a risk profile, or would like a retirement projection, please feel free to reach out or visit www.wealthep.com. Otherwise, stay tuned for our next Market Minute! We hope you all have a great week.
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