Secure Act 2.0 – 5 Changes to be Aware of When Planning For Retirement

SECURE Act 2.0 changed dozens of retirement rules, and the provisions phase in across several years. Five of them touch the largest number of savers and retirees.

1. A later age for required minimum distributions

The age at which required minimum distributions must begin moved to 73, and rises to 75 later this decade for younger cohorts. For anyone retiring before that age, it widens the low-bracket window available for Roth conversions or for spending down pre-tax accounts voluntarily, on your terms rather than the IRS's.

2. A smaller penalty for a missed distribution

The penalty for failing to take a required distribution was cut sharply from its old level, and is reduced further when the shortfall is corrected promptly. It remains an entirely avoidable penalty — the fix is a calendar reminder and a standing distribution instruction.

3. Bigger catch-up contributions in your early sixties

Workers in a defined age band in their early sixties are allowed a larger catch-up contribution than the standard catch-up. Higher earners are also directed to make catch-up contributions on a Roth basis. If you are in the final stretch before retirement, this is real additional room worth using.

4. Roth options inside workplace plans

Employer matching and non-elective contributions may now be made on a Roth basis if the plan allows, and Roth balances in workplace plans are no longer subject to lifetime required distributions. Both changes make it easier to build a pool of tax-free retirement income without leaving your employer's plan.

5. New flexibility for unused 529 funds

Subject to account age, contribution timing, and lifetime limits, leftover 529 balances can be rolled to a Roth IRA for the account beneficiary. It removes one of the long-standing objections to funding a 529 generously — the fear of over-saving for a child who does not need it all.

What to do with this

Two questions are worth asking this year: does my plan document actually offer the Roth features described above, and does my distribution timing still make sense under the later required beginning date? Both are quick to check and can change the shape of a retirement tax plan.

This article is educational and is not individual tax advice. Several provisions phase in on different dates and depend on your plan's terms — confirm specifics with your tax professional and plan administrator.

Common questions

Does the later required distribution age apply to me?

It depends on your year of birth. The starting age moved to 73 and rises to 75 for later cohorts, so two people retiring in the same year can have different required beginning dates. Your plan administrator or tax preparer can confirm yours in a minute.

Do I have to use the larger catch-up contribution?

No — it is an option, not a requirement, and it only exists if your plan adopted the provision. If your cash flow allows it in the years it applies, it is a rare chance to add materially more to a retirement account late in a career.

Should I switch my contributions to Roth?

The same test as any Roth decision applies: compare your bracket now against the bracket you expect on that money later. Many households end up splitting contributions rather than choosing one exclusively.

Sources

• Congress.gov — SECURE 2.0 Act (Division T of the Consolidated Appropriations Act, 2023)
• IRS — Catch-Up Contributions
• IRS — Required Minimum Distributions