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SECURE Act 2.0 Summary

Posted: Mateo Salmeron

On December 23, 2022, Congress passed a new tax bill that will have a huge impact on Americans’ lives in the upcoming years. At WJ, we have been researching and clarifying all the new 92 provisions so we may continue to be a valuable resource to all our clients. Below is a list of key points we feel will have the biggest impact to our client’s lives.

  • New Required Minimum Distribution Age
    If you have started to take RMDs, you will have to continue to take them at the normal schedule. If your birthday falls between the years 1951 – 1959, your new first RMD age is 73. If your birthday falls on or after 1960, your new first RMD age is 75.
  • The New Post-Death Option for Surviving Spouse
    The spouse will now have the option to elect either the spousal rollover IRA using their own age for RMD requirements or an inherited IRA using the decedent’s age for RMD requirements. This can provide a benefit if the surviving spouse is older than the decedent.
  • Roth SIMPLE + SEP IRAs
    The IRS has established new Roth SIMPLE and Roth SEP IRAs that can be opened in 2023. There may be a delay in establishing these accounts to give employers and custodians the time to adapt.
  • Roth Employer Contributions
    This option is open to employers in 2023. Both the matching and non-elective contribution are eligible to be added to a Roth account. The employee will see those contributions added to their taxable income if they elect to do so.
  • Catch-up “Rothification”
    Starting in 2024, if your wages exceed $145,000 then you will be required to add your catch-up contribution to a Roth account. If you do have the opportunity to contribute to the catch-up and your employer does not provide the Roth option, then you will be unable to make the catch-up contribution. There are some other nuanced details as well so please see us for guidance.
  • 529-To-Roth IRA Transfers
    If you qualify under several rules, starting in 2024 you will be able to transfer assets out of 529 Plans into Roth IRAs. If the transfer is elected, it will go from the 529 Plan to the beneficiary’s Roth IRA. Some of the rules include the 529 Plan must have been established for 15 years, the beneficiary must have earned income, and you are limited to the Roth IRA contribution limit.

Regarding implementation, some of the details still need to be ironed out but these are the basic takeaways. We will continue to monitor any updates as they are released.

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