The SECURE Act 2.0: What Investors Need To Know

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Please note the publish date of this blog. Financial information, market conditions, and other data mentioned in this post may no longer be accurate or relevant.

Many Abacus blogs focus on overall retirement and investment strategies or other long-term goals and planning. Occasionally, there are big new pieces of federal legislation that deserve a more granular look. This brief review can potentially help you on several new financial fronts.

On December 29, 2022, the SECURE Act 2.0 was signed into law by Congress. As you may recall, the original SECURE Act (2019) made several changes that impacted retirees:

  • Helped small business owners’ ability to create “safe harbor” retirement plans
  • Delayed the required minimum distribution (RMD) age from 70 ½ to 72
  • Opened investment opportunities in 401(k)s (such as annuities)
  • Required non-spouse IRA inheritors to take distributions that empty the inherited account within ten years
  • Opened up employer retirement savings benefits to part-time employees
  • Gave a $500 tax credit to businesses who set up automatic enrollment in their company 401(k) for employees
  • Allowed 529 Plan funds to pay up to $10,000 toward student loans (lifetime limit per beneficiary)
  • Allowed a penalty-free withdrawal up to $5,000 for plan participants having or adopting a child to offset costs

The initial goal of the SECURE Act was to encourage retirement savings and make it easier for businesses to support their employees with these types of benefits. 

SECURE Act 2.0 also aims to create more retirement savings opportunities for U.S. workers. The Act has six sections that cover everything from retirement savings accounts to savings preservation. 

Here’s a breakdown of the most notable changes from SECURE 2.0 that may impact you.

Required Minimum Distribution (RMD) Age Change

The original SECURE Act shifted the RMD age from 70 ½ to 72. In 2023, under SECURE Act 2.0, that age changes from 72 to 73. In 2033, the age will change to 75. 

For many retirees, the number of RMD age changes may come as a surprise. Revisions to the RMD age requirement (previously 70 ½) haven’t been made since they were initially instituted as part of the Tax Reform Act of 1986. 

However, these changes provide unique planning opportunities for retirees and those with accounts requiring RMDs, such as 401(k)s, 403(b)s, and 457(b)s, who aren’t ready to retire or who can postpone taking funds from retirement accounts (and avoid the taxes on those funds). 

Delaying your RMDs a few years may offset taxable events or help you strategically plan your cash flow. Additionally, the SECURE Act 2.0 reduces the penalty for failing to take RMDs from 50% to 25%. 

To recap, from 2023 to 2032 you can wait until age 73 to take your RMDs. Starting in 2033, you can wait until you’re 75.

529 Plan Updates

The SECURE Act 2.0 creates a new rule to let families move leftover funds in a 529 Plan to a Roth IRA for the plan’s beneficiary. There are, however, several requirements and limitations:

  • The change will take effect in 2024 
  • Qualifying rollovers are tax- and penalty-free
  • The 529 Plan must have been open at least 15 years
  • Beneficiaries can roll over a maximum of $35,000 throughout their lifetime, up to the maximum annual Roth IRA contribution limit; in other words, if the 529 Plan account beneficiary is under 50, they can roll over $6,500 each year until they reach the lifetime $35,000 limit
  • The 529 Plan beneficiary can be changed before a rollover is made; this can help parents take funds in a 529 Plan and distribute them to all their children or beneficiaries over several years

Retirement Savings

Whether you’re an employer or an employee, several changes have been made for those involved in a company-wide retirement savings plan like a 401(k) or 403(b). 

For Employees:

  • Higher catch-up contributions are allowed for individuals between the ages of 60 to 63; catch-up contribution limits for this age group will increase to $10,000/year in January of 2025, with some exceptions; these limit increases apply to 401(k)s, 403(b)s, and 457 plans
  • Employers/plan sponsors can treat “qualified student loan payments” as elective deferrals for matching contributions to an employee’s retirement account
  • Employers can provide contribution matching to Roth accounts

For Employers and Businesses:

  • All new 401(k) and 403(b) plans must have an automatic enrollment feature ranging from 3% to 10%. This is true for businesses with more than 10 employees


  • People who have Roth 401(k)s or 403(b)s will not have to take RMDs

ABLE Account Eligibility

ABLE accounts are tax-advantaged savings accounts for individuals with disabilities and their families. Historically, to qualify for an ABLE account, an individual must have had an onset of disability at or prior to age 25. 

The SECURE Act 2.0 increases this age limit to 46, letting those with disability onset later in life to qualify. This is particularly valuable for those who may develop mental health conditions like schizophrenia, where symptoms may not manifest until age 25 or later. 

Have Questions?

These are just a few of the biggest changes in the SECURE Act 2.0, but the laundry list of items the legislation covers is long. If you have additional questions, you can find a complete overview of the SECURE Act 2.0 on the Senate’s website. 

As always, if you have any questions regarding changes from the SECURE Act 2.0, please don’t hesitate to reach out. Abacus is always here to offer clarity and help.


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