The SECURE 2.0 Act “allows for additional features in various employer retirement plans to encourage use of these plans” according to the IRS. The goal of the program is to help encourage employees to contribute to their retirement plans.
In this blog, we review the most notable provisions which may be helpful with your retirement savings goals.
Catch Up Contributions
Catch up contributions are important because as people approach retirement age, they may feel they are running out of time to save for when they are no longer receiving a paycheck. The changes the SECURE 2.0 Act enacted provide more opportunities for older workers to save more since the remaining working years ahead are limited. The idea is for these changes to impact the way working people save and feel more “secure” in retirement when they get there.
- Starting in 2023, you were required to withdraw minimum distributions from your retirement accounts at age 73. In 2033, the required minimum distribution age will be 75.
- If you make more than $145,000 each year, any catch-up contributions are required to be made in a Roth 401(k) account. Although you will be contributing money you’ve already paid taxes on, when you withdraw it later in retirement, it will be tax-free. Sounds nice, right?
- Employees 50 or over can contribute an additional $7500 to their 401(k). That’s a total maximum contribution of $30,500 for 2024.
- In 2025, if you are aged 60-63, you can contribute a catch-up amount in your retirement account of $10,000 or 150% of the regular catch-up limit.
- Employees will have the option to receive matching contributions to a Roth account which equals more tax-free savings.
- If you are charitably inclined, beginning in 2023, you can make a one-time gift up to $50,000 as a QCD (Qualified Charitable Distribution) to a “split-interest entity” such as a charitable remainder unitrust, a charitable remainder annuity trust, or a charitable gift annuity. SECURE 2.0 provides more opportunities to make QCDs and for charitable organizations to receive increased donations.
How SECURE 2.0 helps with saving for retirement for younger workers
- As of 2025, businesses with 401(k) plans are required to automatically enroll employees starting at a 3% contribution rate.
- Student loan payments can be “matched” by employers and contributed to employees’ retirement accounts. Employers can help workers save while they are paying off student debt.
- In 2024, defined contribution retirement plans can add an emergency savings account that is a designated Roth account for non-highly compensated employees. The limit is $2500 annually depending on the plan and there will be access to the funds penalty free in case of emergency.
These are just a few opportunities brought by SECURE 2.0. If you have questions about these changes and how they might affect your plan, please give VLP a call.
Registered Representatives offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Advisor. Cetera is under separate ownership from any other named entity. 8391 Old Courthouse Rd. Ste. 203 Vienna, VA 22182. (703) 356-4360
This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. Clients seeking information regarding their particular investment needs should contact a financial professional.