It’s not often Uncle Sam makes it easier to save for retirement, but the recent SECURE Act 2.0 provides investors with a slew of advantages when planning for financially sound golden years. This sequel to the original Setting Every Community Up for Retirement Enhancement Act (SECURE) includes nearly 100 provisions to help Americans save more while increasing the flexibility of retirement accounts. Some of these changes took effect immediately while others will be rolled out in the years to come. Let’s take a look at some of the most important SECURE Act 2.0 retirement changes so you can optimize your retirement savings.
Pre-Retirement Changes
Many of the SECURE Act 2.0 retirement changes support investors when saving and planning for retirement.
👉 Related read: 6 Strategies to De-risk Your Nest Egg for Robust Retirement Savings
Auto-Enrollment Expansion
Automatic enrollment in employer-based retirement plans is nothing new. However, the SECURE Act 2.0 expands this practice by increasing the default contribution rate for all 401(k) and 401(b) accounts established in 2025 and beyond. The new contribution amount must fall between three percent and 10% with an annual one-percent increase until reaching 10% to 15%. This change is designed to increase enrollment in employer-sponsored retirement plans by simplifying the process. It is possible to opt out of auto-enrollment, but employees have to actively request it.
“Contributing to your IRA allows you to protect a certain amount of money from the [government].”– Precious Metals Advisor John Karow
Emergency Distributions
Among the more unique SECURE Act 2.0 retirement changes is the inclusion of emergency distributions. From 2024 onwards, investors will be able to make a penalty-free withdrawal from their retirement accounts of up to $1,000. This new development is intended to give investors greater financial flexibility when dealing with unpredictable expenses. You’re limited to one emergency withdrawal each year so long as the distribution is repaid in full within three years. If you don’t repay the withdrawn amount, you’re restricted to a single emergency distribution every three years.
Post-Retirement Changes
A good portion of the SECURE Act 2.0 retirement changes give retirees greater flexibility when it comes to accessing and utilizing their nest eggs.
Delayed RMDs
The delay of required minimum distributions (RMDs) is perhaps the most advantageous of the SECURE Act 2.0 retirement changes. Since an Individual Retirement Account (IRA) allows for the investment of tax-deferred dollars, the government forces retirees to withdraw a certain amount during retirement to get their cut. Under the new rules, you have a few more years to grow your retirement savings before the Fed intervenes. More specifically, the law requires investors to start making RMDs at the age of 73, instead of 72. This went into effect at the beginning of 2023. On January 1, 2033, the age will jump to 75. Unfortunately, if you turned 72 before or in 2022, you’re subject to the previous rules.
What about RMD penalties?
Prior to these SECURE Act 2.0 retirement changes, you could face a 50% penalty for failing to make an RMD. That punishment has been halved to 25% but can be further minimized to 10% if the account holder takes the correct RMD amount and amends the relevant tax return.
Catch-Up Contribution Increases
If you’ve been struggling to max out your retirement plan contributions, this expansive piece of tax legislation gives you extra breathing room. Although previous law allowed for catch-up contributions for older individuals, the SECURE Act 2.0 significantly increases the permitted amount to $10,000, up from $7,500. This pertains to individuals aged 60 to 63 years old. In recognition of rampant inflation in the economy, the catch-up contribution limit will be adjusted accordingly. This change goes into effect in 2025.
QCD Expansion
For decades, the IRS has allowed retirees to reduce their taxable income through donations in the form of qualified charitable donations (QCDs). The SECURE Act 2.0 ensures the $100,000 annual QCD limit is adjusted for inflation starting in 2024. The legislation also broadened the eligible charities to which retirees can make a one-time gift of up to $50,000. The expanded list of potential recipients includes “charitable gift annuities, charitable remainder unitrusts, and charitable remainder annuity trusts.” The act doesn’t change the age at which retirees can make QCDs which stands at 70½.
Lower Eligibility Requirements for 401(k)s
A lot of the SECURE Act 2.0 retirement changes focus on older individuals, but one crucial adjustment makes it easier for employees of all ages to qualify for employer-sponsored retirement plans. Starting in 2025, employees who work at a company part-time for two years can access employer-sponsored retirement accounts. Employees have to clock at least 500 hours of work each year to meet the new requirements. The prior law required part-time employees to work at a company for three years before becoming eligible for retirement plan benefits.
Limited Penalties for Prohibited Transactions
While traditional and Roth IRAs, 401(k)s, and other mainstream retirement accounts limit investors to standard assets, a self-directed IRA permits investments in a range of alternative instruments. However, this increased flexibility comes with stricter guidelines. The IRS outlines a number of prohibited transactions that prevent investors from using tax-advantaged dollars for personal gain. Among the vast SECURE Act 2.0 retirement changes is a limitation in the penalties for such restricted trades. More specifically, an investor possessing multiple IRAs will only face repercussions within the account where the prohibited transaction took place.
De-Risk Your Retirement Savings With Gold
The SECURE Act 2.0 retirement changes give investors greater flexibility when it comes to maximizing their nest eggs. However, the economic landscape is growing increasingly volatile, making it harder for investors to optimize their savings. Savvy investors are increasing their gold holdings to protect against increasing economic uncertainty and instability. This tried and true inflation hedge has a proven track record of preserving wealth, especially during periods of economic downturn. Setting up a self-directed IRA allows you to make physical gold and other precious metals part of your nest egg for a truly diversified portfolio.
“A lot of people are not trusting the government, the Federal Reserve, or the banks. They want to take possession of some of their savings and retirement.”– Sr. Precious Metals Advisor Todd Graf