What the SECURE Act and SECURE 2.0 Act Mean for Your Retirement

1. Later Required Minimum Distribution (RMD) Age

The age at which you must start taking required minimum distributions (RMDs) from traditional retirement accounts is raised from 72 to 73 (and eventually to 75 in future years). This allows more time for retirement savings to grow tax-deferred. Roth IRAs and Roth accounts in workplace retirement plans are exempt from RMDs. 

2. No Age Limit on Traditional IRA Contributions

It used to be that you couldn’t contribute to a traditional IRA after age 70½, but the SECURE Act repealed this restriction. You can contribute to a traditional IRA for as long as you like, provided you have what the IRS considers “earned income.” 

3. Penalty-free Withdrawals for the Birth or Adoption of a Child

You can withdraw up to $5,000 from your workplace plan or IRA within a year after the birth or adoption of a child without having to pay the usual 10% penalty for early withdrawal. If you’re married, you and your spouse can each withdraw $5,000 from your respective accounts, penalty-free. 

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4. Penalty-free Emergency Withdrawals

Under the SECURE 2.0 Act, you can withdraw up to $1,000 a year from your workplace plan to cover expenses related to a personal or family emergency. Although the withdrawal will be subject to regular income tax, you will not incur the 10% penalty that would otherwise generally apply to a distribution before age 59½. Under a separate provision, employers can automatically enroll employees in emergency savings accounts. 

5. Time Limit on Withdrawals from an Inherited IRA 

Previously, when an IRA owner died and the account’s assets went to a beneficiary other than the owner’s spouse, the beneficiary could stretch out withdrawals from these assets over their lifetime. Under the SECURE Act, the non-spouse beneficiary must generally withdraw assets (and pay taxes on them) within 10 years. 

6. Transferring 529 Plan Money to a Roth IRA

Generally, parents can now move unused 529 account savings to a Roth IRA for the 529 account’s beneficiary without triggering taxes or a penalty on the transfer. The transfer cannot exceed the IRA contribution limit for that year, and there’s a $35,000 lifetime limit per account beneficiary on the amount transferred. 

WAEPA’s Free Financial Wellness Program 

WAEPA members have access to a free Financial Wellness Program through our partnership with Ernst + Young (EY). This program includes access to tools and financial advisors to help manage day-to-day finances and work towards long-term goals. 

Content courtesy of Ernst + Young (EY), © 2024 Ernst & Young LLP. All Rights Reserved. FinPlantFS 4.2024