When the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law in 2019, it brought improvements to tax-advantaged retirement accounts and made it easier for Americans to save. The
Understanding these updates can help you make informed decisions when it comes to your retirement plan.
1. SECURE Act 2.0 RMD age changes
Before the original SECURE Act, retirees had to begin taking
The SECURE Act 2.0 will change that age again, ultimately raising it to age 75 in an
- For people born between 1951-1959, the RMD age is 73.
- For people born in 1960 or later, the RMD age is 75.
Raising the age for people to begin taking RMDs allows for more time for the funds to experience tax-deferred growth if you don’t need the assets for living expenses.
2. No RMDs for Roth employer-sponsored retirement accounts starting in 2024
Eliminating this requirement means you have more choices when it comes to managing your retirement savings in a way that best helps you to accomplish your financial goals
3. Surviving spouses may be able to delay RMDs for longer
With the SECURE Act 2.0, a surviving spouse has the same distribution options for
Once RMDs start based on the deceased spouse's age, the surviving spouse can use the
4. Reduced RMD penalties
Failing to take the appropriate RMD would previously have meant facing a 50% penalty on the amount that should have been withdrawn.
One of the more popular SECURE Act 2.0 RMD changes cuts that penalty to 25%. If the account owner identifies the mistake and corrects it by taking the missed distribution within the correction window, the penalty will be reduced further to 10%. The correction window closes two years after the retiree becomes liable for the tax unless the IRS assesses the penalty or mails the taxpayer a letter of deficiency. Be sure to work with a tax advisor if this situation applies to you.
Calculating and taking the correct RMDs on time can be challenging, and it's important to correct any RMD mistakes. This SECURE Act 2.0 provision provides an incentive to do so.
5. Increased Qualified Charitable Distribution (QCD) limits
The SECURE Act 2.0 also provides for a one-time annual QCD of up to $50,000 to establish certain split-interest entities. These include
6. Qualified longevity annuity contracts (QLAC) may be more accessible
Prior law stipulated that no more than 25% of the IRA account balance up to an annual dollar limit ($145,000 in 2022) could be used to purchase an annuity. The SECURE Act 2.0 increases the dollar limit to $200,000 and indexes it for inflation beginning in 2023. It also eliminates the 25% account balance requirement.
Additionally, QLACs will now include a provision that allows a person to cancel the contract within 90 days.
Need help navigating SECURE Act 2.0 changes?
Keeping up with the details of a constantly changing regulatory environment can be stressful. Thrivent financial advisors stay up to date with the latest rules, including the recent changes introduced by the SECURE Act 2.0. Contact