SGH Wealth Management: What I'm Reading

Secure Act 2.0: The Sequel

SGH Wealth Management’s “Read What I’m Reading” Jan. 2023 | Jan. 13th, 2023

Once again in the 11th hour, Congress pushed through the Consolidated Appropriations Act of 2023 (authorizing roughly $1.7 Trillion in Federal Spending…), including the SECURE Act 2.0. One of the biggest headlines of this is a small push-back of the age when required minimum distributions (RMDs) begin:

·Anyone who reaches age 72 in 2023 or beyond, moves their RMD age from 72 to 73.

·Anyone who reaches age 74 after December 31, 2032 will have their RMDs moved back to age 75.

·SECURE 2.0 has no impact on people who are currently taking RMDs.

·The RMD Penalty is reduced from 50% to 25%.

Beyond that, there are several tweaks that Congress must believe are enhancements to the smorgasbord of retirement plan options, to name a few:

·Employers can now deposit matching contributions as Roth dollars, included in the employee’s taxable income.

·Employers can now make matching contributions as qualified student loan payments.

·The catch-up contribution limit will be raised with the inflation rate, in increments of $100.

·Starting in 2025, participants aged 60-63 will be permitted to make catch-up provisions of $10,000 (up from the current $7,500) in their 401(k) plan.

In addition, those that had overfunded their College 529 Savings accounts are now able to move those excess funds directly into a Roth IRA, up to a maximum of $35,000.  The bill requires that the Roth IRA receiving the funds be in the name of the beneficiary of the 529 plan, and the 529 account must have been in existence for 15 years or longer.  (Any contributions made in the most recent 5 years, and earnings on those contributions, are not eligible for this transfer.)

Most interestingly to Financial Planners, What wasn’t changed?

·The Federal Estate Tax Exemption was not reduced.

·The so-called ‘back-door’ Roth contributions are still a workable planning tool.

Check out Sam Huszczo, CFA, CFP’s Tax Planning segment with Fox2News in the 1st link below: