Insights and Resources

Untitled aMaximize Your Retirement Funds: The Roth Revolution Under the SECURE Act 2.0rticle

ARTICLE | August 01, 2023


The SECURE Act 2.0, signed into law in December 2022, has brought significant changes to retirement planning. The Act boasts 92 provisions aimed at enhancing every community's retirement preparation. Whether you are kick-starting your career, contemplating retirement, or have already retired, the changes could impact your financial planning trajectory. This article highlights some of the key changes introduced by the SECURE Act 2.0 and how they might affect you.

One major amendment pertains to automatic 401(k) enrollment. Starting in 2025, all newly established retirement plans must include a provision that automatically enrolls employees in 401(k) deferral election at 3% of their compensation. Each consecutive year will observe a 1% increase until it hits the maximum of 10%. Employees retain the freedom to modify their deferral election. However, absent a deferral election form, an automatic 3% 401(k) deferral will apply. This provision does not affect retirement plans established before 2025.

The Act also modifies the Required Minimum Distribution (RMD) age. From 2023 onwards, the RMD age shifts to 73, extending to 75 by 2033. This age change does not affect individuals who turned 70.5 before 2020 or those born in 1950 or earlier, who continue to follow the age 72 rule. This alteration provides additional years for retirement savings to grow but may result in larger RMDs, translating to higher federal income tax bills. The Act also reduces the penalty for missed or insufficient RMD distributions from 50% to 25%. Timely correction of this error can further reduce the penalty to 10%.

The SECURE Act 2.0 also introduces changes to the IRA and 401(k) contribution catch-up limits. From 2024, the IRA catch-up limit will be indexed for inflation. Additionally, starting in 2025, individuals aged between 60 and 63 will be eligible for a higher catch-up limit of $10,000 or 150% of the regular catch-up limit, whichever is higher. This limit will be indexed for inflation post-2025. However, from 2024, all catch-up contributions to qualified retirement plans will be subject to Roth tax treatment, except for employees earning $145,000 or less.

For employers, the Act offers enhanced tax credits for implementing a retirement plan. This provision is particularly beneficial for small businesses, such as ABC Printing in our example. By setting up a 401(k) Safe-Harbor Match retirement plan and making contributions for his 12 employees, owner Jack is eligible for increased tax credits, significantly reducing his expenses. Furthermore, starting in 2024, employers can make additional contributions to each participant in a SIMPLE IRA plan, given the contribution does not exceed 10% of compensation or $5,000, indexed for inflation.

The SECURE Act 2.0 is a comprehensive retirement legislation that seeks to encourage participation in retirement plans and provide better retirement security. By understanding these changes, individuals and businesses can leverage the Act's provisions to optimize their retirement planning strategies. However, it's advisable to seek professional guidance in navigating these provisions to ensure the best possible outcome.

Let's Talk!

Call us at +1 213.873.1700, email us at or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty: