You may have heard about SECURE Act 2.0. What is so special about it? It provides incentives for Americans to save more for retirement.
SECURE is an acronym for Setting Every Community Up for Retirement Enhancement. The first SECURE Act became law in 2020. At that time, the most notable changes were around the minimum age for required minimum withdrawals (RMDs) from IRAs (from age 70 ½ to age 72), how beneficiaries of IRAs were defined (eligible designated beneficiary, non-eligible designated beneficiary, and non-designated beneficiary) and the imposition of timelines for distribution of IRA monies went into effect (depending on the applicable category, the beneficiary must use either a 10-Year Rule or a 5-year rule). In effect, the SECURE Act helped people delay taxation of their retirement accounts while living but, in the event of death, required their beneficiaries to spend those inherited IRAs within a specific time.
Now that SECURE Act 2.0 is in place, the age for RMDs has once again increased from age 72 to age 73 for those born between 1951-1959 and to age 75 for those born in 1960 and later. This provides an opportunity for those nearing retirement to talk with their financial planners and tax professionals about their retirement plans, including the impact of RMDs on their tax bill. For parents and grandparents who have 529 college plans for children and grandchildren, SECURE 2.0 provides a unique opportunity for funds from a 529 to be transferred into a Roth IRA in the name of the beneficiary. However, there are caveats. The 529 plan must be over 15-years old and contributions (plus earnings on those contributions) over the 5 most recent years are ineligible to be moved. There are additional limits and rules that should be explored and discussed with your financial planner.
Opportunities abound for people to plan and save for retirement. Talk with your financial planner today about how SECURE Act 2.0 may impact you and your financial situation.
Wendolyn Forbes is a CERTIFIED FINANCIAL PLANNER™ with Wealth Transition Finance, A Member of Advisory Services Network, LLC, where she offers financial planning and investment management services for either a one-time or on-going cost. Wendolyn is a fee-only financial planner and member of the National Association of Personal Financial Advisors (NAPFA). For more information about Wendolyn’s financial services practice, please visit her website at www.wtf-asn.com.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP® (with flame design) in the US, which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
This material is provided as a courtesy and for educational purposes only. Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. Consult your own legal or tax professional for information concerning your individual situation.
Originally published in the April 2023 issue of Positively Haywood by Vincinitus.