Written by: Kayla Famolare, Business Operations Project Leader
The recently passed SECURE 2.0 bill has several new changes that can impact your retirement savings—whether you are in, approaching, or far from retirement age, these changes can impact your long-term retirement planning. We have captured the highlights below:
- The age you can begin taking Required Minimum Distributions (RMDs) will increase to 73 in 2023, eventually hitting 75 by 2033.
- If you are turning 72 in 2023 and have already scheduled your withdrawal, you may want to consider updating your withdrawal plan and deferring another year given this new law.
- Currently, there is a 50% penalty if you do not take an RMD from your IRA. This will now decrease to 25% of the RMD amount. And if you correct it in a timely manner, will only be a 10% fee.
- Beginning in 2024, RMDs will no longer be required from Roth accounts in employer retirement plans.
- Catch-up contributions for 401(k), 403(b), governmental plans, and IRA accounts will increase in 2025.
- If aged 60-63, contributions can be made up to $10,000 or 150% of the limit in effect for the year.
- For employees earning over $145,000, catch-up contributions must be Roth.
- By 2025, businesses adopting new 401(k) and 403(b) plans are now required to automatically enroll eligible employees, starting at a contribution rate of at least 3%.
- This will also allow for automatic portability services that can transfer an employee’s low balance retirement account to a new plan when they change jobs.
- Enrollees in defined contribution retirement plans can now add an emergency savings account to an associated Roth account.
- Beginning in 2024, employers will be able to “match” an employee’s student loan debt payments. This can incentivize employees to save while working and paying off student loan debt.
Turning 72 in 2023?
You will need to take your first RMD by either December 31, 2024 or no later than April 1, 2025. Keep in mind that if you delay your first RMD to April 2025, you will need to take 2 RMDs in 2025 (first in April 2025 to satisfy your withdrawal for 2024 and your second by December 31, 2025 to satisfy 2025).
Call your financial advisor with any questions, or to strategize your first RMD withdrawal that makes sense for you.
To read a summary of the SECURE Act from the U.S. Committee on Finance, visit here.
To view an abbreviated press release, visit the link here.
Reach out to your Shepherd Financial Partners team with any questions or comments.
The content is developed from sources believed to be providing accurate information.
The economic forecast set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Investment advice offered through Shepherd Financial Partners, LLC, a registered investment advisor. Registration as an investment advisor does not imply any level of skill or training.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Securities offered through LPL Financial, member FINRA/SIPC. Shepherd Financial Partners and LPL Financial are separate entities. Additional information, including management fees and expenses, is provided on Shepherd Financial Partners, LLC’s Form ADV Part 2, which is available by request.