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  • Writer's pictureAnn J. Shubert, CFP, MBA

SECURE Act 2.0 + Your Retirement - Changes That Could Help You This Year

Updated: Aug 18, 2023


The recently passed SECURE Act 2.0 is packed with provisions designed to strengthen the retirement system in the US, changes that could affect how you save for retirement or manage your savings in retirement.


However, the various provisions take effect at different times spread out over the next ten years. What changes are in effect right now, in 2023, and how could they benefit you?


Here’s the Ann-splaining™ Update:


1. Roth SIMPLE IRA and Roth SEP IRA plans are now allowed for 2023. The reality is that it may take a while for the IRS to issue related guidance, and custodians like brokers and banks to update their paperwork, but as soon as that happens, small business owners and their employees will have access to another powerful way to save for retirement.

  • Saving into a Roth type account, where the money goes in after taxes now, but grows tax deferred and is withdrawn tax-free, is valuable in an environment like today, where tax rates are at historic lows, and many experts believe tax rates are only going to rise in the future.

  • Unlike individual Roth IRA accounts, SIMPLE IRA and SEP IRA accounts do not have any income limits on who is eligible to contribute and have higher maximum contribution amounts. Assuming that does not change with the new Roth versions, these employer sponsored retirement plans will allow small business owners and their employees to put even more away in Roth type accounts starting in 2023.

If you own a small business, even a sole proprietorship, and want to catch up on your retirement savings, you can start a Roth SIMPLE IRA or Roth SEP IRA plan and build your Roth savings faster than with an individual Roth IRA.

2. Employer matches and non-elective contributions to 401(k) plans may be made as Roth contributions. Historically, all employer contributions were made pre-tax, meaning that all withdrawals of the contributed amount and earnings would be taxed at income tax rates. If an employer’s 401(k) plan allows for Roth contributions in general, then employers may choose to offer this as an option that employees would select, but it is not required.

  • The employee will pay taxes on the employer Roth contribution because it will be included in their gross income. This is similar to how the employee’s own Roth contributions to the 401(k) are handled. The provision does not apply to profit sharing contributions, however, so projection of the potential tax consequences of selecting this option should be straightforward.

  • Unlike pre-tax employer contributions, the employee must be immediately vested in these employer Roth contributions, since the employee has already paid the taxes on the income. This may limit adoption of this option by companies that use gradual vesting to encourage employee retention.

If your company starts offering this option, before you sign up be careful to calculate what the additional gross income will do to your overall tax picture, as well as how the additional taxes you will pay will affect your cash flow.

3. The age when you must begin taking Required Minimum Distributions (RMDs) from Traditional IRA accounts and other qualified retirement accounts will increase from 72 to 73 in 2023.

  • If you turned 72 in 2022, you are still required to take your first RMDs for 2022, based on the value of your qualified accounts on Dec 31st, 2021. Because it will be your first year taking RMDs, you have until April 1st, 2023 to withdraw the funds. You will then have RMDs for 2023 and future years which must be taken by the end of each calendar year.

  • If you are turning 72 in 2023, you get to wait another year longer to take your first year of RMDs, when you turn 73 in 2024. If you don’t need to take money out of your IRA in 2023, you can avoid paying income taxes on distributions for one more year. (A quirk of the law is that no one will start their RMDs in 2023!)

You or an older family member could benefit from these additional “gap” years between retirement and the start of RMDs, if lower taxes provide a window for improving your retirement plan with taxable moves such as Roth conversions.

These are just a few of changes in the SECURE Act 2.0 that could affect how you save for retirement or manage your savings in retirement. If you have any additional questions about managing your retirement or saving for retirement, contact me today.



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