Happy New Year everyone, we hope you had a wonderful holiday season and wish you a healthy, happy, and prosperous New Year. Before the start of 2023, on December 29th, Congress passed the Secure 2.0 Act that was promised to provide changes to help many Americans’ retirement plans, including over 90 updated retirement plan provisions.
The provisions are set to encourage more employers to create retirement plans and automatically enroll employees to stimulate retirement savings growth, change the age individuals must take RMDs, make it easier to take cash out of retirement and more. We wanted to share a few of the updates that may have an impact on your financial plan and will report back with additional information and changes:
“Mandatory Retirement Auto-Enrollment
Required Minimum Distribution (RMD)
Effective on January 1, 2023, the RMD age has been raised for some individuals based on the following criteria:
- Born in 1950 or earlier: RMD begins at age 72
- Born between 1951-1959: RMD begins at age 73
- Born in 1960 or later: RMD begins at age 75
Roth 401(k) RMD
Beginning in 2024, RMDs are no longer required from Roth 401(k) accounts. RMDs are still required from Roth 401(k) accounts in 2023.
Qualified Charitable Distribution (QCD) Indexed for Inflation
Beginning in 2024, the maximum annual QCD of $100,000 will be adjusted for inflation.
401(k) / SIMPLE IRA Catch-Up Contributions
Starting in 2025, some individuals can increase their employer-sponsored retirement plan catch-up contributions.
- 401(k): Individuals whose age is 60-63 in 2025 and later will see their catch-up contribution limit increased to a greater of $10,000 or 150% of the regular catch-up contribution amount. RightCapital will default to $10,000 at this time.
- SIMPLE IRA: Individuals whose age is 60-63 in 2025 and later will see their catch-up contribution limit increased to a greater of $5,000 or 150% of the regular catch-up contribution amount. RightCapital will default to $5,000 at this time.”
While these are only just a few of the many changes made in the Secure 2.0 Act, we know that these updates and information may be overwhelming, which is why it is important to defer to a trusted source such as your financial advisor to ensure you are understanding all and any changes. As we embark on 2023, it is a great time to get organized and review your budget and overall financial plan for the year to come. If you have any questions for us on the Secure Act 2.0 or your personal financial situation, email info@shermanwealth.com or schedule a complimentary intro call here.
