Financial Planning with the SECURE Act 2.0

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Passed in December 2022, the SECURE Act 2.0 builds upon the SECURE Act of 2019, creating more opportunities for enhanced retirement savings. The SECURE Act 2.0 contains more than 90 provisions impacting all types of retirement savings for both individuals and businesses. Due to the breadth of this legislation, this article will focus solely on the provisions that are the most impactful to individuals.

Required Minimum Distributions

The SECURE Act 2.0 includes two increases to the age at which Required Minimum Distributions (RMDs) need to begin. For those attaining age 73 between 2023 and 2032, RMDs will begin at age 73. For those attaining age 74 in 2033 or later, the beginning age for RMDs will be 75. Individuals who attained age 72 by December 31, 2022 are still obligated to begin RMDs at 72.

Beginning in 2024, SECURE 2.0 also eliminates RMDs for employer-based Roth accounts (Roth 401(k), Roth 403(b), Roth 457 and Roth portions of Thrift Savings Plans). Prior to this legislation only Roth IRAs avoided RMDs, but now it encompasses any Roth-based employer plan account. SECURE 2.0 will eliminate that requirement for both those currently taking RMDs from these accounts and for those who have not yet reached their required beginning age.

The tax penalty for failing to take an RMD by year-end will be reduced from its current level of 50% of the amount not taken to 25% and may be further reduced to 10% if corrected in a “timely manner.”

Catch-Up Contributions

Individuals who attain age 50 in a given year become eligible to contribute additional amounts to both IRAs and employer-sponsored plans, called “catch-up” contributions. For IRAs, this amount has been $1,000 per year since 2015. This amount will now be indexed for inflation starting in 2024.

The Act also increases the catch-up contribution limit for certain participants in employer-sponsored plans. Beginning in 2025, individuals who have attained age 60, 61, 62, or 63 in a given tax year will be eligible to contribute the greater of $10,000 or 150% of the regular catch-up contribution limit for that year.

For those with prior year W-2 income over $145,000 (indexed for inflation), these increased catch-up contributions will only be allowed to be made to Roth accounts. This rule does not apply to Traditional or SIMPLE IRA catch-up contributions. Because the limit is specific to W-2 income, sole proprietors or partners will not be forced to make their catch-up contributions into Roth accounts if they earn more than $145,000 per year.

Expanded Roth Offerings

Employers may now choose to allow employees to decide whether to receive matching and nonelective contributions on a pretax or Roth basis. If an employee elects to receive these contributions to a Roth, those amounts would be includable in the employee’s income and would be deductible to the employer. Previously, employer matching and nonelective contributions were only available as pre-tax. This change is effective in 2023.

Also beginning in 2023, employers may begin offering Roth SEP and SIMPLE IRAs alongside the Traditional options.

529 Plan Rollovers to Roth IRAs

Beginning in 2024, unused 529 funds may be rolled into a Roth IRA in the beneficiary’s name, subject to several restrictions:

  • The 529 plan must have been active for a minimum of 15 years as of the date of rollover to the Roth IRA
  • Contributions plus earnings made to the 529 plan within the past 5 years cannot be rolled over
  • The rollover amount, when added to any regular traditional and Roth IRA contributions for the year, cannot exceed that year’s IRA contribution limit ($6,500 in 2023)
  • The beneficiary must have earned income to complete a rollover, just as is required for regular traditional or Roth contributions
  • The maximum lifetime limit for rollovers is $35,000 which will take over 5 years to reach based on current contribution limits

As of this writing, the lifetime limit is not scheduled to be indexed for inflation, and it is unclear how or if 529 beneficiary changes may impact the rollover rules. There is no income limit for 529 plan rollovers.

Surviving-Spouse IRA Beneficiaries

Effective 2024, surviving spouses who are beneficiaries of a deceased spouse’s retirement account may elect to be treated as the deceased spouse for the purposes of RMD rules. This allows the surviving spouse to take RMDs based on the deceased spouse’s life expectancy, and to delay RMDs until the deceased spouse would have reached the required beginning age if the death occurred before that date. If the surviving spouse also dies before RMDs begin, the beneficiaries named by the surviving spouse will be treated as original account beneficiaries rather than successor beneficiaries, providing for the more favorable treatment afforded Eligible Designated Beneficiaries under the original SECURE Act of 2019.       

This is the opposite of a Spousal IRA rollover in which the surviving spouse can rollover their deceased spouse’s retirement accounts into their own. It will be helpful for surviving spouses who are older than their deceased spouse.

Qualified Charitable Distributions from IRAs

Qualified Charitable Distributions (QCDs) from IRAs allow account owners over age 70 ½ to distribute up to $100,000 per year directly from an IRA to a charitable organization tax-free. Beginning in 2024, that $100,000 limit will be indexed for inflation.

SECURE 2.0 also allows for a once-in-a-lifetime opportunity for taxpayers to use a QCD to fund a split-interest entity, such as a Charitable Remainder Trust, with a limit of $50,000 per individual and subject to a few restrictions.

Other Items

Perhaps one of the most notable other items within the SECURE Act 2.0 allows sole proprietors to establish and fund individual 401(k)s with deferrals for a prior tax year, up until the due date of the individual’s tax return without extensions.

Starting in 2026, ABLE accounts will be available for those who are disabled prior to age 46, a significant increase from the current age limit of 26. Families with domestic staff will be able to create and fund SEP IRAs for those employees beginning in 2024. 

The Act contains numerous other provisions, including expanded exceptions to the 10% penalty for withdrawals by those under 59 ½, new emergency fund accounts linked to employer retirement plans, and a student loan payment employer match to retirement plans, among others. 

Impact to Financial Planning

  • The increase in the beginning age for RMDs creates an opportunity for additional tax-deferred growth on those accounts, as well as a longer timeframe in which to process Roth conversions after retirement when tax brackets often drop.
  • Expanded options for Roth contributions will allow for more tax-free savings. Funds contributed to Roth accounts grow tax-free and will not be taxed when withdrawn if certain conditions are met. Although the contributions are after-tax and therefore do not reduce taxable income, the opportunity for tax-free retirement income is significant, particularly for younger people and those in lower tax brackets.
  • Those with funds left in their 529 plans may now rollover a maximum of $35,000 into a Roth IRA to help jumpstart their beneficiary’s retirement savings, provided all relevant restrictions are met. With no income limitation for the rollovers, this option is available even to those over the Roth contribution income limit.
  • For surviving spouse beneficiaries of retirement accounts who inherit the account of a younger spouse, electing to be treated as the deceased spouse may allow the account to continue to grow tax-deferred for a longer time. If RMDs had already begun, or when they do, the amount will be based on the IRS tables for account owners rather than the one for beneficiaries, which provides a longer timeframe for distribution and therefore may decrease the tax liability incurred by RMDs.


While this article is not all-inclusive of the SECURE Act 2.0’s enhancements to retirement savings, we are keeping apprised of the upcoming changes and their impact on our clients. Additional planning opportunities will be available on a more nuanced basis. To further analyze your own unique circumstances and understand what additional planning opportunities are available to you, please reach out to your Freestone Client Advisor.

Important Disclosures: Nothing in this article is intended to provide, and you should not rely upon it for, accounting, legal, tax or investment advice or recommendations. We are not making any specific recommendations regarding any financial planning or tax strategy, and you should not make any financial planning or tax decisions based on the information in this article. The intention of this article is educational and it is intended only to discuss a few limited aspects of a very complex legislation. This article is not a comprehensive or complete summary of considerations regarding its subject matter. Each individual is in a different situation and has different items to address, and the options in this article are not appropriate for everyone. Please consult your Freestone client advisor and a tax professional regarding options specific to your needs.

Posted By: Stephanie d'Ippolito, CFP®

Stephanie d’Ippolito, CFP®, is our Managing Director of Financial Planning. She is passionate about helping people and believes that financial planning can be a valuable tool for clients to understand and solve their unique financial problems. She lives in Seattle with her husband and two dogs, Toby and Thurman.