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Scott Neal

Scott Neal, CPA, CFP, is the president of D. Scott Neal, Inc., a fee-only financial planning and investment advisory firm with offices in Lexington and Louisville. Reach him at or by calling 1.800.344.9098.

Retirement Laws Have Changed… Yet Again

Remember 2019? Congress passed a huge piece of legislation called the Setting Every Community Up for Retirement Enhancement Act of 2019. It became known as the SECURE Act. It included a provision that raised the requirement for mandatory distributions from retirement accounts and increased access to retirement accounts.

Now, just three years later, another massive ($1.7 trillion) spending bill contains many changes to our retirement laws. It has been called SECURE ACT 2.0 and is designed to encourage Americans to save for retirement. It is long overdue in my opinion, and gives recognition that Americans are living and working longer than ever before. The impact on savings will be biggest on our younger readers, but there are plenty of changes that will impact even those who are already retired, or about to be.

Some Things You Need To Know:

1. Changing the age of the required minimum distributions (RMD). Three years ago, SECURE 1.0 increased the age for taking the required minimum distribution (RMD) to 72 years from 70½. If you turn 72 in 2023, the age required for taking your RMD rises to 73. If you turned 72 in 2022, you’ll remain on the old schedule. For those who turn 72 in 2023, you may delay your RMD until 2024, when you turn 73. Or you may choose to take your first RMD to as late as April 1, 2025. Just be aware that you will be required to take two RMDs in 2025, one no later than April 1 and the second no later than December 31. Tax projections covering several years are made more beneficial because

“Many Americans lack adequate savings, and SECURE 2.0 helps address some of the challenges for many in planning for retirement.”

of these changes. Your advisor can help you with these. Starting in 2033, the age for the RMD will rise to 75.

Employees enrolled in a Roth 401(k) will not be required to take RMDs from their Roth 401(k). That begins in 2024

2. RMD penalty relief. Beginning this year, the penalty for missing an RMD is reduced to 25% from 50%. And SECURE 2.0 goes one step further. If the RMD that was missed is taken in a timely manner and the IRA account holder files an amended tax return, the penalty is reduced to 10%. But just to be clear, while the penalty has been reduced, you’ll still pay a penalty for missing your RMD. Pay attention.

3. A shot in the arm for employer-sponsored plans. Congress felt that too many Americans do not have access to employer plans or simply don’t participate. So, starting in 2025, companies that set up new 401(k) or 403(b) plans will be required to automatically enroll employees at a contribution rate between 3% and 10% of their salary. Employees may opt out of the employer-sponsored plan. To encourage employees to sign up, employers will be allowed to offer gift cards or small cash payments.

The new legislation also allows for automatic portability, which will encourage folks in low-balance plans to transfer their retirement account to a new employer sponsored account rather than cash out.

4. Increased catchup provisions. In 2025, SECURE 2.0 increases the catch-up provision for those between 60 and 63 from $6,500 in 2022 ($7,500 in 2023 if 50 or older) to $10,000, (the greater of $10,000 or 50% more than the regular catch-up amount). Furthermore, the amount is indexed to inflation. One caveat — catch-up dollars are required to be made into a Roth IRA unless your wages are under $145,000.

5. Charitable contributions. Starting in 2023, SECURE 2.0 allows a one-time, $50,000 distribution to charities through charitable gift annuities, charitable remainder unitrusts, and charitable remainder annuity trusts. One must be 70½ or older to take advantage of this provision. The $50,000 limit counts toward the year’s RMD. It also indexes an annual IRA charitable distribution limit of $100,000, known as a qualified charitable distribution, or QCD, beginning in 2023.

6. Back-door student loan relief. Starting next year, employers are allowed to match student loan payments made by their employees. The employer’s match must be directed into a retirement account, but it is an added incentive to sock away funds for retirement.


7. Disaster relief. You may withdraw up to $22,000 penalty-free from an IRA or an employer-sponsored plan for federally declared disasters. Withdrawals can be repaid to the retirement account.

8. Help for survivors. Victims of abuse may need funds for various reasons, including cash to extricate themselves from a difficult situation. SECURE 2.0 allows a victim of domestic violence to withdraw the lesser of 50% of an account or $10,000, penalty-free.

9. Rollover of 529 plans. Starting in 2024 and subject to annual Roth contribution limits, assets in a 529 plan can be rolled into a Roth IRA, with a maximum lifetime limit of $35,000. The rollover must be in the name of the plan’s beneficiary. The 529 plan must be at least 15 years old. This can be huge for any 529 and should be considered before the 529 is used.

In the past, families may have hesitated in fully funding 529s amid fears the plan could wind up being overfunded and withdrawals would be subject to a penalty. Though there is a $35,000 cap, the provision helps alleviate some of these concerns.

Final Thoughts

Once again, at our firm, we welcome these changes. Many Americans lack adequate savings, and SECURE 2.0 helps address some of the challenges for many in planning for retirement.

What we have provided here is a high-level overview of the SECURE Act 2.0. Keep in mind that it is not all-inclusive. We are always here to assist you, answer your questions, and tailor any advice to your needs. Additionally, you should reach out to your tax advisor for her or his input.

Scott Neal is president of D. Scott Neal, Inc., a fee-only financial planning and investment advisory firm with offices in Lexington and Louisville. He can be reached at 1.800.344.9098 or