As you approach your golden years, you know the importance of estate planning and ensuring your retirement funds can keep up.
In 2020, congress passed the SECURE 2.0 Act, which President Biden signed into law in December. It features a range of changes regarding retirement savings. Three key changes include:
1. Age raised
Designed to boost savings, the initial act raised the age for required minimum distributions from 70 ½ to 72. The latest version bumps that up to 73. The act includes a provision that will further raise that age to 75 by 2033. This change allows people to continue building money and avoid withdrawal taxes. These ages apply to simple and SEP IRAs.
2. Access enhanced
While still designed for savings, new rules will make it easier to gain access to money without penalties for some circumstances. These situations include long-term care, domestic abuse, terminal illness and certified disasters. In 2024, some plans will have the option for people to take out money for emergency expenses, up to $1,000, with the option to reinvest that amount over three years.
3. Catch-up distribution increased
People aged 60 to 63 who have employer-based plans will soon have the opportunity to invest more as catch-up contributions. The act states the new limits as the greater of $10,000 or 50% more than the standard amount. In 2024, catch-up contributions will start to get indexed for inflation.
Additional portions of the updated act include 529 plan conversions, student loans and automatic 401(k) enrollment.