Intro to SECURE Act 2.0
The SECURE Act 2.0 is an update to 2019’s original SECURE Act — or the Setting Every Community Up for Retirement Enhancement Act. The first version of the SECURE Act brought numerous changes to required minimum distributions (RMDs), traditional individual retirement account (IRA) contributions, annuity offerings, and 529 plans.
The SECURE Act 2.0 seeks to expand on the initial version’s groundwork. The House of Representatives passed this bill in March of 2022, which means Senate confirmation and President Joe Biden’s approval would make the updates a reality.
5 Major Changes Coming to How You Save for Retirement
As the SECURE Act 2.0 is likely to pass in the Senate, now is a great time to analyze how it will impact how you save for retirement. Here are five major changes the SECURE Act 2.0 will bring.
1. Higher Catch-Up Contribution Limits
As an incentive that encourages saving, the SECURE Act 2.0 allows individuals between the ages of 62 and 64 to contribute more to their 401(k), 403(b), and SIMPLE plans. The limit for 401 (k) and 403 (b) plans will raise from $6,500 to $10,000, while the SIMPLE plan limit will raise from $3,000 to $5,000.
2. Assistance for Student Loan Borrowers
A new addition in version 2.0, student loan borrowers will now have a way to receive employer contributions, even if they aren’t saving for retirement yet. Under the SECURE Act 2.0., your employer would contribute as much to your retirement plan as you contribute to your student loans.
3. Delayed Minimum Distributions
Version 2.0 extends the age at which workers must begin withdrawing from their retirement accounts. The initial version set the age at 72, but version 2.0 will increase the age first to 73 by 2022, then 74 by 2029, and 75 by 2032.
4. Easier Annuity Purchases
Annuities are excellent ways to disperse your retirement payouts and avoid overuse. Under the SECURE Act 2.0, annuities become easier to include in retirement plans. The update will reduce RMD requirements for annuity options while expanding the retirement savings amount you can use to purchase a Qualified Longevity Annuity Contract (QLAC).
5. Reduced Costs for Employers
The SECURE Act 2.0 reduces the financial burden of retirement planning on employers in a few ways. Small businesses with up to 100 employees would receive a 100% three-year small employer startup tax credit. Additionally, version 2.0 lowers costs and regulations for 403(b) plans. All the while, version 2.0 reduces penalties for reporting errors.
Learn More With Fort Pitt Capital
Fort Pitt Capital Group is committed to helping employees save for retirement and maintain financial comfort when the time finally comes. We invite you to browse our financial services for individuals online or get in touch to discuss your situation.