SECURE Act 2.0 provisions: 7 changes in 2024 & how they may affect you

The passage of the SECURE Act 2.0 in 2022 introduced several sweeping improvements to how Americans can use retirement savings plans. Some SECURE Act 2.0 provisions took effect in 2023, such as adjusting the age for required minimum distributions (RMDs).

But more changes lie ahead in 2024. Which matters if you're:

• Taking RMDs from traditional or Roth 401(k)s, 403(b)s, 457(b)s or IRAs.
• Needing to make early withdrawals from retirement accounts.
• A beneficiary of a 529 plan with leftover account balances.
• A student loan holder with an employer-sponsored retirement plan.
• An employer who wants to create emergency fund plans for your employees.

Here's a review of seven SECURE Act 2.0 2024 changes and how they may offer new options for your retirement savings strategy.

Two notable changes to RMDs in 2024 may impact your retirement withdrawal strategy. RMD rules say that you have to withdraw a certain amount of money, as determined by the IRS, starting at age 73 and every year after.

1. RMDs are no longer required for employer-based Roth plans, such as a Roth 401(k), Roth 403(b) or Roth 457(b). This adjustment aligns these accounts with how Roth IRAs have always addressed RMDs.
2. Surviving spouses now can be treated as the deceased employee for RMD calculations. That means you can elect to calculate the RMD on your deceased spouse's IRA as if you were the account owner and using the Uniform Lifetime Table.
   

The SECURE Act 2.0 allows employers to make an additional nonelective contribution of up to 10% of the employee's earnings or $5,000, whichever is less.

Withdrawing from tax-advantaged accounts like a 401(k) or IRA typically incurs a tax penalty. But there are SECURE Act 2.0 changes in 2024 that will expand what the IRS accepts as penalty-free withdrawals.

• Emergency expenses. The IRS could allow a withdrawal of up to $1,000 to be exempt from the 10% tax penalty if it's for an unexpected and immediate financial need. Retirement account owners will be allowed one withdrawal every three years—or as early as one year if the money is repaid.
• Survivors of domestic abuse. Retirement plan participants who have experienced domestic abuse may be able to withdraw up to $10,000 or 50% of their available retirement savings (whichever’s less) without a tax penalty. Although not required, the money can be repaid within three years, which would allow the owner a refund on the income taxes paid.

Currently, hardship distribution rules can differ for 401(k) and 403(b) plans. For 401(k) plans, both contributions and interest earned could be available for a hardship withdrawal. But in some cases, 403(b) owners experiencing hardship may be limited to withdrawing from their contributions only, not earnings. Beginning in 2024, the rules for hardship for a 403(b) will match those for a 401(k), making more options available to 403(b) account owners who are eligible for hardship withdrawals.

Beginning in January 2024, beneficiaries of 529 college savings plans can roll over money in their account to a Roth IRA. The amount of the 529 plan rollover must stay within the annual Roth IRA contribution limit ($7,000 for 2024) and cannot exceed the lifetime maximum of $35,000. Only 529 plans that have been open for more than 15 years will be eligible, and other qualifying conditions may apply.

Employees balancing saving for retirement with paying off student loans may soon have help. Employers can now treat employees' student loan payments as an elective deferral and match the amount paid, putting it toward the worker's retirement savings account, such as a 401(k), 403(b), 457(b) or SIMPLE IRA.

Saving for the unexpected could get easier for eligible employees whose employers offer pension-linked emergency savings accounts. In 2024, employees can contribute to these savings accounts with after-tax dollars up to a maximum of $2,500 annually. There are no penalties or fees for the first four withdrawals each year. If you leave the company, you can cash out your employer-sponsored emergency savings or roll it into a Roth retirement savings account to allow your money the opportunity to continue growing.

The SECURE Act 2.0 has even more provisions that take effect in 2024 and after as well. In 2025, people ages 60-63 will get an extra bump in catch-up contribution limits to 150% of the regular contribution limits or $10,000 —whichever is greater. And after that, the amounts will be indexed for inflation. Another big change in 2025 will make newly eligible participants enrolled automatically in employer-sponsored retirement plans rather than having to opt in.

Understanding how these provisions impact you this year and beyond will ensure you're on track and help you remain confident in your retirement strategy. Your local Thrivent financial advisor can go over the SECURE Act 2.0 provisions with you and offer personalized insights on how to best move forward to meet your retirement goals.