After some concerns it would not get passed in time, but with no ‘controversy on substance’, the SECURE ACT 2.0 is now law. Now with the January 3rd deadline met, financial advisors, plan sponsors and ordinary Americans can expect significant changes to the rules around retirement. Whether it will transform the majority of American lives, after leaving work, remains to be seen. For now at least, millions of workers across the US will see a big shift in how they prepare for life after work.
Here are 5 important provisions from the SECURE ACT 2.0 likely to be rolled out :
Matching Contributions Based Off Student Loan Repayments
Matching contributions are of course voluntary but the general idea is that employees don’t have to choose between student loan repayments and topping up their retirement plans. Employers can now make a matching contribution into their 401(k).
Streamlined Roll-Over Process
Good news and bad news, if you’re fed up with the byzantine roll-over process the SECURE ACT 2.0 is now requiring the Treasury Secretary to standardize the process with sample forms. The bad news is that this probably won’t be put in place until 2025.
Increased RMD age
This year retirees are required to make RMDs at 73 years old, and then 75 in 2033. This does not include non-Roth tax-deferred retirement accounts.
Catch-up Contribution Limits go up
In 2026 catch-up contributions will be indexed by inflation. Before that, in 2025, it will be $10K or 150%, whichever is more, for those aged 60-63 years old.
Reduction of Penalty For Failed RMD
This time around the penalty for a missed RMD is less severe; dropping form 50% down to 25%, and only 10% if you’re quick about paying. But maybe set a reminder on your hone just in case.
The SECURE ACT 2.0 does indeed have the power to transform retirement for millions of Americans. However it is the IRS who’ll have to put it into practice so we could see some growing pains with regards to interpretation and application. Furthermore there is still much to be done about the looming crisis of an aging population where as much as 50% don’t save at all for retirement. The SECURE ACT 2.0 has no provisions for them.
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