Jan 10, 2023

Highlights of the SECURE Act 2.0

Nearly 50% of Americans make a New Year’s resolution in early January. The most popular categories being exercise, diet, and money. One of First Pacific Financial’s annual resolutions is to continue our exceptional care of clients in an increasingly complicated financial world. We have found that by working together we can make money resolutions unnecessary!

One item that was likely missed by many as they wrapped up the year was the passing of the SECURE Act 2.0 by Congress on December 29, 2022. This is a massive 350-page bill that creates changes in rules that roll out over many years. We felt it important to cover the highlights for those interested.  We know that many strategies are yet to be discovered in the SECURE Act 2.0 and our list of changes is certainly not comprehensive.

Your personal financial situation and the conversations that you have with your trusted financial professionals will best help you understand how this new law will affect you.


The following changes are effective in 2023:

  • Required Minimum Distribution (RMD) age is being pushed back. If you were born in 1950 or earlier, there are no changes for you. If you were born from 1951-1958, your RMD will start in the year in which you turn age 73. For those who are age 72 this year, you get another year before your RMD is required. If you were born in 1959 or later, your RMD will start at age 75.
  • Not changing: Qualified Charitable Distributions can still be taken starting at age 70.5.
  • The penalty for failing to take your RMD is reduced from 50% to 25% and reduced even further to 10% if you fix it quickly (we are not exactly sure what is interpreted as quickly).
  • The new provisions allow for Roth options in both SEP IRAs and SIMPLE IRAs.
  • In retirement plans, employers will be allowed to put employer contributions into Roth 401(k)s at the employee’s request. Previously, employers had to put their portion into the traditional pre-tax 401(k).
  • In retirement plans, student loan payments will now count as elective deferrals for employer matching purposes (should the retirement plan allow).
  • There are new start-up 401(k) incentives for small businesses including auto enrollment and contribution limits that match IRA contribution limits (currently $1,000).

The following changes are effective in 2024:

  • Transfers from 529 Accounts to Roth IRAs will now be allowed for a 529 Plan beneficiary when the plan has been in effect for at least 15 years. There are additional stipulations that the last 5 years of earnings and contributions are ineligible and a maximum of $35,000 can be moved from the 529 Plan to a Roth IRA. The maximum amount you can move each year is based on IRA contribution limits which cannot exceed the annual limit, and is currently $6,500 for 2023. The conversion of 529 Plan assets to a Roth IRA is not subject to the income limit stipulations for Roth IRA contributions.
  • The Qualified Charitable Distribution (QCD) limit of $100,000 stays the same but will be adjusted for inflation starting in 2024. There is also a one-time $50,000 allowance to fund a Charitable Remainder Trust or Charitable Gift Annuity.
  • Roth accounts in retirement plans such as 401(k)s and 403(b)s will no longer be subject to RMDs starting in 2024, even if you were already taking RMDs previously.
  • IRA catch-up contributions (currently $1,000) will increase with inflation starting in 2024.
  • If you have earned income over $145,000, your catch-up contribution will need to be into a Roth (after-tax) 401(k). If the employer does not offer a Roth option, you may not be able to make a catch-up contribution.
  • There are added election options for IRAs when one spouse passes away.

The following change is effective in 2025:

  • The catch-up contributions for people aged 60, 61, 62, and 63 will increase to the greater of $10,000 or 150% of the regular catch up contribution from the previous year. There are some discrepancies in the amount and calculation, but there is time for this to be interpreted. The important part is that there will be the ability for people in this age group to make additional contributions.


Additional resources: