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SECURE Act 2.0 - Summary and Review

February 27, 2023
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Key Takeaways

  • SECURE Act 2.0, signed into law Dec. 29, 2022, makes numerous changes that impact retirement savers and retirees.
  • The age to start taking RMDs increases to age 73 in 2023 and to 75 in 2033.
  • The penalty for failing to take an RMD will decrease to 25% of the RMD amount, down from 50% currently, and 10% if corrected in a timely manner for IRAs.
  • Beginning in 2024, RMDs will no longer be required from Roth accounts in employer retirement plans.
  • Catch-up contributions will increase in 2025 for 401(k), 403(b), governmental plans, and IRA account holders.
  • Starting in 2024, 529 plan assets can be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000.

Overview

In the final days of 2022, Congress passed a new set of retirement rules designed to make it easier to contribute to retirement plans and access those funds earmarked for retirement.

The law is called SECURE Act 2.0, and it is a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019. The sweeping legislation has dozens of significant provisions, so to help you see what changes may affect you, we have broken the major provisions into two separate sections: For clients in or near retirement, and For clients years away from retirement.

For clients in or near retirement

1.  The RMD age will rise to 73 in 2023. By far, one of the most critical changes was the age at which owners of retirement accounts must begin taking required minimum distributions (RMDs). And starting 2033, RMDs may begin at age 75. If you turned 72 before January 1, 2023, you must continue taking distributions. But if you are turning 72 this year and have already scheduled your withdrawal, we may want to revisit your approach. 1

The current penalty for failing to take an RMD is 50%. Starting this year, the penalty will decrease to 25% of the RMD amount and will be reduced to 10% for IRA owners if the account owner withdraws the RMD amount previously not taken and submits a corrected tax return in a timely manner.2

There are new exceptions to the 10% early withdraw penalty. For example, effective 2024, an employee can get up to $1,000 from a retirement account for personal or family emergencies. Other emergency provisions exist for terminal illnesses and survivors of domestic abuse.3

In addition to these new changes, Roth accounts in employer retirement account plans will be exempt from the RMD requirements starting in 2024.

2.  Increased catch-up contributions. Beginning January 1, 2025, individuals aged 60 through 63 can make catch-up contributions of up to $10,000 annually to workplace retirement plans. The catch-up amount for people aged 50 and older in 2023 is $7,500. However, there is a caveat: If the individual earns more than $145,000 in the prior calendar year, all catch-up contributions at age 50 or older will need to be to a Roth account in after-tax dollars. 4

3.  Matching for Roth accounts. Employers will also be able to match employee contributions to qualified retirement plans on a pre-tax or after-tax basis beginning in 2023, whereas previously they could only make pre-tax contributions. Furthermore, SEP and SIMPLE IRAs will be allowed to be designated for Roth contributions, which was previously not permitted.5

4.  Qualified charitable distributions (QCDs). A QCD enables IRA owners aged 70½ and older to donate up to $100,000 to qualified charities each year through a non-taxable distribution from their IRA. Beginning in 2024, the new law indexes the current $100,000 annual limit for inflation. Furthermore, starting in 2023, the law allows for a one-time QCD of $50,000 to be given to charities through a charitable gift annuity, charitable remainder unitrust, and charitable remainder annuity trust. This is an expansion of the types of charities that can receive QCDs.6

For clients years away from retirement

5.  Automatic enrollment. Beginning in 2025, businesses that adopt new 401(k) and 403(b) plans must automatically enroll employees in workplace plans, with a minimum contribution rate of 3%. However, employees can choose to opt-out.7

6.  Student loan matching. The new law allows employers, starting in 2024, to match employee student loan payments with retirement contributions. The rule change offers workers an extra incentive to save for retirement while paying off student loans.8

7.  529 to a Roth. Starting in 2024, 529 plan assets can be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000. Any contributions to the 529 plan within the last 5 years (and the earnings on those contributions) are ineligible to be moved to a Roth IRA.9

8.  Support for small business. Effective in 2023, the new law will increase the credit to help with the administrative costs of setting up a retirement plan. The credit increases to 100% from 50% for businesses with less than 50 employees. By boosting the credit, lawmakers hope to remove one of the most significant barriers for small businesses offering a workplace plan.10

Bottom line

While SECURE 2.0 provides increased opportunities to save for retirement, everyone’s financial situation is different. And just because retirement rules have changed does not mean that adjusting your current strategy is appropriate. For our current clients, if we believe changes are appropriate, we will outline an approach and work with you to implement a solution.  


  1. “SECURE 2.0 Act of 2022: Rethinking retirement savings”, Fidelity Institutional
  2. “SECURE 2.0 Act of 2022: Rethinking retirement savings”, Fidelity Institutional
  3. “The SECURE 2.0 Act: Changes to retirement plan withdrawals and contributions.”, by Chris Bogren, JD.
  4. “SECURE 2.0 Act of 2022: Rethinking retirement savings”, Fidelity Institutional
  5. “SECURE Act 2.0: Implications for Retirees and Retirement Savers”, by Rob Williams, CFP®, CPWA® and Hayden Adams, CPA, CFP®.
  6. “SECURE Act 2.0: Implications for Retirees and Retirement Savers”, by Rob Williams, CFP®, CPWA® and Hayden Adams, CPA, CFP®.
  7. “SECURE Act 2.0 Offers Incentives to Businesses and Employees for Retirement Plans”, 12/30/2022; https://www.paychex.com/articles/compliance/secure-act-changes
  8. “SECURE Act 2.0: Implications for Retirees and Retirement Savers”, by Rob Williams, CFP®, CPWA® and Hayden Adams, CPA, CFP®.
  9. “SECURE Act 2.0: Later RMDs, 529-To-Roth Rollovers, And Other Tax Planning Opportunities”, 12/28/2022, by Michael Kitces; https://www.kitces.com/blog/secure-act-2-omnibus-2022-hr-2954-rmd-75-529-roth-rollover-increase-qcd-student-loan-match.
  10. “SECURE Act 2.0 Offers Incentives to Businesses and Employees for Retirement Plans”, 12/30/2022; https://www.paychex.com/articles/compliance/secure-act-changes

Important Disclaimers and Disclosures