What is the SECURE Act 2.0 and how does it help my 401(k) savings?
The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act is a federal law passed in late 2022 to help Americans save for retirement. The law includes several changes to retirement policy, including:
Raising the age for required minimum distributions (RMDs)
The age at which you must begin taking RMDs increases from 72 to 73 in 2023 and then to 75 in 2033. The penalty for not taking an RMD is also reduced from 50% to 25%, and to 10% if corrected within two years.
Increasing catch-up contribution limits
For people ages 60 to 63, the catch-up contribution limit increases to the greater of $10,000 or 50% more than the regular catch-up amount.
Allowing student loan repayments to be treated as elective deferrals
Employers can treat student loan payments as elective contributions to a 401(k), 403(b), or SIMPLE IRA for purposes of their employer match.
Encouraging employees to contribute to retirement plans
Employers can offer small financial incentives to employees who choose to participate in retirement savings arrangements.
Making part-time employees eligible to enroll in retirement plans sooner
Starting January 1, 2025, long-term part-time workers can enroll in their employer's retirement plan after two years instead of three.
SECURE 2.0 is a continuation of the original Secure Act of 2019, which also changed how Americans saved and withdrew money from their retirement accounts.
