The SECURE Act and SECURE Act 2.0 have introduced significant reforms to U.S. retirement savings, impacting individuals, employers, and beneficiaries alike. By expanding retirement savings opportunities and updating requirements, these acts aim to bolster Americans' financial security in retirement. Here’s a breakdown of each act, highlighting the primary differences, key benefits, and impacts.
The SECURE Act 2.0 and Retirement Planning Strategy
Ryan Millan, CPA
What is the SECURE Act?
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted in December 2019 to address gaps in retirement savings options. It was designed to make retirement plans more accessible, update certain requirements, and enhance long-term retirement security. Here are some of the core benefits and changes from the original SECURE Act:
Increased Age for Required Minimum Distributions (RMDs): The SECURE Act raised the age at which individuals must start taking RMDs from retirement accounts from 70½ to 72.
Eliminated “Stretch IRA” for Non-Spousal Beneficiaries: Instead of allowing non-spousal beneficiaries to stretch out IRA distributions over their lifetime, the SECURE Act requires them to withdraw all funds within 10 years.
Increased Access to 401(k) Plans for Part-Time Workers: The Act allows part-time employees who work 500 hours per year for three consecutive years to participate in 401(k) plans.
What is the SECURE Act 2.0?
Building on the foundation of the original SECURE Act, SECURE Act 2.0 was enacted in December 2022 to further expand access to retirement savings and incentivize individuals to save more. It introduced additional changes and enhancements, addressing some gaps left by the initial legislation. Key elements of SECURE Act 2.0 include:
Delayed RMD Age: The age for mandatory RMDs has been raised again to 73 starting in 2023, and will gradually increase to 75 by 2033.
Automatic Enrollment for New Plans: SECURE Act 2.0 mandates automatic enrollment in 401(k) and 403(b) plans for eligible employees, with the option to opt out.
Catch-Up Contributions Enhanced: Starting in 2025, the act allows higher catch-up contribution limits for employees ages 60 to 63 in workplace retirement plans.
SECURE Act vs. SECURE Act 2.0
| Feature | SECURE Act (2019) | SECURE Act 2.0 (2022) |
|---|---|---|
| RMD Age | Increased to 72 | Increased to 73 in 2023, rising to 75 by 2033 |
| Stretch IRA for Non-Spousal Beneficiaries | Replaced with 10-year rule | 10-year rule maintained |
| 401(k) for Part-Time Workers | Eligible after 500 hours per year for 3 years | Reduces to 2 consecutive years starting in 2025 |
| Automatic Enrollment | Not included | Mandatory for new plans starting in 2025 |
| Catch-Up Contributions for Older Workers | Standard catch-up limit | Enhanced limits for ages 60-63 starting in 2025 |
| Student Loan Matching | Not included | Allows employer matching on student loan payments |
Key Benefits of SECURE Act 2.0
Greater Flexibility with RMDs
By increasing the RMD age to 73 (and eventually 75), SECURE Act 2.0 allows retirees to keep funds invested longer, potentially enhancing retirement growth.
Encouragement of Automatic Savings Automatic enrollment for new retirement plans is a key element in helping employees start saving early and consistently, improving overall retirement preparedness.
Incentives for Student Loan Borrowers
- The SECURE Act 2.0’s provisions for employer matching contributions based on student loan payments mean that borrowers can build retirement savings while repaying student debt.
Improved Access for Part-Time Workers
- By reducing the eligibility requirement to two consecutive years for part-time employees, SECURE Act 2.0 offers more individuals access to employer-sponsored retirement plans.
SECURE Act 2.0 Benefits in the 2025 Tax Year
Understanding the 2025 IRS retirement contribution limits is crucial for maximizing your retirement savings strategy. Learn about the significant changes coming to 401(k) contribution limits in 2025, including the recently announced base contribution increases and the new age-based catch-up provisions established by the SECURE Act 2.0
Additional Resources:
2025 401(k) IRS Contribution Limit Increases and Catch-up Amounts
