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10 Ways SECURE 2.0 May Impact Your Retirement Savings

by Michael Boncher

January 27, 2023 High Net Worth & Wealth Transfer

On December 29, 2022, President Biden signed into law the Consolidated Appropriations Act, 2023 (CAA). In addition to serving as the legislative vehicle to fund the federal government for fiscal year 2023, the CAA also includes the SECURE 2.0 Act of 2022. SECURE 2.0 is a continuation of the important retirement provisions first introduced in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).

Although SECURE 2.0 contains many provisions, the following 10 items will likely affect the greatest number of individuals looking ahead to retirement.

1. Increase in Age for Required Minimum Distributions from Retirement Accounts

Prior to the 2019 SECURE Act, retirement account owners were required to begin taking required minimum distributions (RMDs) at age 70 ½. That Act increased the age to 72 effective January 1, 2020.

SECURE 2.0 increases the age to 73 or 75, depending on the account owner’s date of birth. Below are the ages at which mandatory distributions must begin:

Born before July 1, 1949 Age 70 ½
Born after June 30, 1949, through 1950 Age 72
Born during 1951 through 1959 Age 73
Born during 1959 and forward Age 75

Impact: Changing the date at which RMDs must begin provides individuals with more time to be strategic with Roth conversion strategies. Note there appears to be a drafting error in the legislation, as an individual born in 1959 falls into two categories, age 73 and age 75. Clearly we need guidance on this point; however, since individuals born in 1959 will not turn age 73 until 2032, there is plenty of time to receive the guidance and implement strategies accordingly. 

2. Higher Catch-Up at Age 60, 61, 62 and 63

Prior to SECURE 2.0, employees 50 years of age and older were allowed to make catch-up contributions to their employer sponsored retirement plans, such as a 401(k), of an amount indexed for inflation. 

For 2023, the catch-up amount is $7,500. Beginning in 2025, the catch-up limit for individuals who are 60 through 63 will be the greater of $10,000 or 1.5 times the amount of the 2025 regular catch-up amount. The higher catch-up amount will also be indexed for inflation after 2025.

Assuming no inflation adjustments between now and 2025, the higher catch-up amount will be $11,250 or an additional $3,750 in excess of the catch-up amount for those age 50 through 59 and 64 and older.

Impact: An additional contribution of $3,750 for four years may not seem significant, but, hypothetically, if you contribute an additional $3,750 to your 401(k) for four years from ages 60 through 63, at a 7 percent growth rate, and further assuming you do not withdraw the additional catch-up contributions until age 90, those additional contributions would add approximately $110,000 to your retirement account balance.   

3. Catch-Up Contributions for Highly Compensated Employees

Beginning in 2024, highly compensated employees — those earning more than $145,000 — will be allowed to make catch-up contributions only on a Roth (post-tax) basis. Previously, employees had the ability to make catch-up contributions on a pre- or post-tax basis, regardless of compensation.

Impact: This new provision effectively forces higher income earners to pay tax on their catch-up contributions at a higher marginal tax rate, rather than pay tax on the distribution during retirement when it is likely their tax rate will be lower. On the positive side, it may induce more employers to add a Roth option to their qualified plans, and thus allow for the benefit of tax-free growth in Roth accounts to more employees.  

4. Employer Matching Contributions Treated as Roth Contributions

Effective upon the passage of SECURE 2.0, defined contribution plans, such as a 401(k), can now provide employees with the option of receiving employer matching contributions on a Roth (post-tax) basis. Previously, employer matching contributions could be received only on a pre-tax basis.

Impact: This change presents a great opportunity for workers in lower tax brackets or the 0% bracket. The employer match has the potential to be a completely tax-free transaction, as no tax would be paid on the withdrawal, since it is Roth designated, and no tax would be paid when the initial contribution is made if the individual is in the 0% tax bracket. 

5. Indexing the IRA Catch-Up Limit

Prior to SECURE 2.0, individuals 50 years of age or older were allowed to make a catch-up contribution to their IRA of $1,000. Beginning in 2024, the $1,000 IRA catch-up limit will be indexed for inflation.

Impact: This provision will help keep the annual catch-up equal from year to year on an inflation adjusted basis. Without inflation adjustments, the effective value of the catch-up gets smaller with each passing year. 

6. IRA Distributions to Charity

Prior to SECURE 2.0, individuals 70½ or older were allowed to distribute up to $100,000 tax-free from an IRA to certain charitable organizations without including the distribution in gross income. The $100,000 limit will now be indexed for inflation.

SECURE 2.0 will also now allow a one-time $50,000 distribution from an IRA to charities through charitable gift annuities, charitable remainder trusts and charitable remainder annuity trusts.

Impact: This is a nice enhancement to a useful tax saving provision for those individuals with large RMDs who are charitably inclined. IRA distributions to charity can be counted toward satisfying an RMD, and the amount is not included in income. Although you can’t take a charitable deduction since the amount is not included in income, the income exclusion could potentially result in lower Medicare premiums and allow you to benefit on a state tax return if that state does not otherwise allow a charitable contribution deduction. The new, one-time gift of $50,000 to charitable vehicles seems most applicable for charitable gift annuities. The charitable trust option is likely too expensive to administer with a $50,000 funding cap.   

7. Rollovers from 529 Plans to Roth IRAs

Effective in 2024, beneficiaries of 529 college savings accounts will be permitted to roll over up to $35,000 over the course of their lifetime from any 529 account in their name to their Roth IRA. The rollovers will be subject to the Roth IRA annual contribution limits, and the 529 account must have been open for more than 15 years.

Impact: This provision will be helpful for individuals with overfunded 529 accounts. Prior to SECURE 2.0, distributions from 529 accounts not used for qualified educations expenses were subject to tax on investment gains and generally subject to a 10 percent penalty. The option to roll over an overfunded 529 account to a Roth IRA may help jump start a younger worker’s retirement savings who currently cannot afford to make Roth IRA contributions. 

8. Reduction in Penalty for Failing to Take a Required Minimum Distribution

Beginning in 2023, the penalty tax for failing to take an RMD from a retirement account is reduced from 50 percent to 25 percent. Additionally, if the failure is corrected in a timely manner, the penalty tax is further reduced from 25 percent to 10 percent.

Impact: This is welcome relief for individuals who failed to take their RMD, whether they did not understand the rules, experienced health problems, inherited a retirement account late in a calendar year, etc. The former 50 percent penalty tax was quite severe, so this provision offers some relief to a common error under the complicated RMD regime.  

9. Retirement Account Employer Match Connects to Student Loan Payments

Before SECURE 2.0, an employee needed to be actually contributing to their 401(k) to be eligible to receive matching contributions from their employer.

Beginning in 2024, employers will be allowed to treat an employee’s payment of student loan debt as if it were a contribution to their 401(k), thus allowing the employee to receive employer matching contributions to their 401(k) plan.

For example, assume an employer offers a 50% match for every dollar the employee contributes to their 401(k). Under the new rule, a student loan payment can be considered as if it were made directly to the 401(k), allowing the employer to make a matching contribution. In this instance, if an employee makes a $5,000 payment on student loan debt, the employer will be able to contribute $2,500 to the employee’s 401(k).  

Impact: This provision will help employees with lingering student loan debt also save for retirement, particularly for those employees who were not contributing to their employer’s retirement plan at all because they couldn’t afford it. 

10. Roth Plan Distributions

Prior to SECURE 2.0, RMD rules applied to the original account owner of an employer sponsored retirement plan, such as a Roth 401(k), but not to an original account owner of a Roth IRA. Beginning in 2024, the RMD rules no longer apply to the original account owners of either of these types of Roth accounts. 

Impact: Now that both Roth IRAs and Roth 401(k)s are exempt from the RMD rules, there is no longer a need to roll over a Roth 401(k) to a Roth IRA in an effort to avoid the RMD rules. Also note this rule change applies to original account owners only. A beneficiary who inherits such an account must still follow the RMD rules.


Generally, the changes highlighted either benefit taxpayers or provide more flexibility. Individuals should be coordinating with all of their advisers to take advantage of the new opportunities provided by SECURE 2.0. Plan sponsors will also need to work with their attorneys and plan administrators to update their qualified plan documents to reflect the mandatory or optional provisions under SECURE 2.0.  

Contact Michael Boncher at mboncher@cohencpa.com or a member of your service team to discuss this topic further.

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.

About the Author

Michael Boncher, CPA

Senior Manager, Tax
mboncher@cohencpa.com
586.541.7799

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