Make the most of SECURE Act 2.0 – 6 new opportunities to explore

September 2023

SECURE Act 2.0, which became law in December 2022, includes many changes that may help you better reach your retirement and other financial goals. But which provisions might affect you the most, and when can you start planning for new opportunities? 

Given the recency of the law, there are still some unknowns as regulators, retirement plan administrators and employers work through the logistics. However, as SECURE Act 2.0 takes effect over the coming years, an Ameriprise financial advisor will help you identify and implement strategies to take advantage of its benefits.

Here are opportunities to explore:

If you're in retirement...

1. Consider how the new RMD ages will impact your retirement withdrawal strategy

What SECURE Act 2.0 changed: The law increases the required minimum distribution (RMD) age first from 72 to 73 years old, and then to 75 in 2033.¹ 

Opportunity to explore: Consider how you may use the additional time and flexibility to manage your retirement withdrawals strategically. However, fewer years to take RMDs can have potential tax and estate planning implications. Connect with a financial advisor to discuss how delaying RMDs may impact your broader financial picture.

What investors should consider: While the new RMD ages may be welcome news to some, holding money in pre-tax accounts until RMDs begin isn't always the best strategy due to:

• Tax and Medicare implications: Because some Medicare premiums and Social Security taxation are determined by your income, taking out more in RMDs in your later years could result in higher Medicare surcharges and higher taxes.
• Estate planning implications: Inherited retirement plan assets generally must be distributed within 10 years by a non-spouse beneficiary. If your account balances are high, this can increase the taxes beneficiaries pay on their inheritance.² 

2. Take advantage of the increased limits for qualified charitable distributions in 2024

What SECURE Act 2.0 changed: The limit on qualified charitable distributions (QCDs), which has been capped at $100,000 since its introduction in 2006, will be indexed for annual inflation beginning in 2024.  Changes under the new law also allow for a one-time gift of up to $50,000 from an IRA to a split-interest entity.³ 

Opportunity to explore: If you plan to transfer funds from an IRA to a charity, consider how you may be able to donate a larger amount starting in 2024. Additionally, though the RMD age has increased, the age at which you can start taking QCDs remains 70½. Taking advantage of QCDs before you reach your RMD age can potentially help you reduce taxes now and reduce your RMDs in later years.

What investors should consider: QCDs are only available from IRAs and not from 401(k) plans.

2. Take advantage of the increased limits for qualified charitable distributions in 2024

What SECURE Act 2.0 changed: The limit on qualified charitable distributions (QCDs), which has been capped at $100,000 since its introduction in 2006, will be indexed for annual inflation beginning in 2024.  Changes under the new law also allow for a one-time gift of up to $50,000 from an IRA to a split-interest entity.³ 

Opportunity to explore: If you plan to transfer funds from an IRA to a charity, consider how you may be able to donate a larger amount starting in 2024. Additionally, though the RMD age has increased, the age at which you can start taking QCDs remains 70½. Taking advantage of QCDs before you reach your RMD age can potentially help you reduce taxes now and reduce your RMDs in later years.

What investors should consider: QCDs are only available from IRAs and not from 401(k) plans.

If you are saving for retirement ...

3. Make bigger catch-up contributions beginning in 2024 and 2025

What SECURE 2.0 Act changed: Starting in 2024, IRA catch-up contribution limits will be adjusted for inflation each year.⁴ (IRA catch-up limits were previously fixed unless an increase was approved by law.) Starting in 2025, employees who are 60 to 63 years old will be able to make larger catch-up contributions to 401(k), 403(b), 457(b), SIMPLE IRA and SIMPLE 401(k) plans.⁵ 

Opportunity to explore: The new limits can help boost your retirement accounts during your final working years. Talk to a financial advisor about how you may want to free up cash flow to take advantage of the increased limits when they go into effect.

What investors should consider: If the employee’s prior-year wages exceeded $145,000, the catch-up contribution must be made as a Roth contribution for non-IRA plans beginning in 2026. A financial advisor can help you evaluate the benefit of these Roth contributions.

4. Consider how Roth changes can help you reach your financial goals

What SECURE 2.0 Act changed: Starting in 2024, RMDs will be eliminated for Roth 401(k) accounts.6  Additionally, effective this year, the new law allows for employer matching or profit-sharing Roth contributions and Roth contributions to SEP and SIMPLE IRAs. 

Opportunity to explore: These changes increase the number of options an investor can leverage to diversify their retirement portfolio, from a tax perspective. Many investors gravitate toward tax-deferred accounts — such as a 401(k) — and thus, may to be overweighted in investments that will be taxed in retirement. SECURE Act 2.0 makes Roth contributions — which are not taxed in retirement — a more accessible and attractive option for investors.

What investors should consider: Further guidance from the Treasury Department is still needed to implement Roth matching or profit sharing and contributions to SEP and SIMPLE IRAs.