New Laws May Affect Your Retirement

On December 29, 2022, a new spending bill went into effect in the United States. As part of the bill, President Biden signed into law the SECURE (Setting Every Community Up for Retirement Enhancement) 2.0 Act. Building on the original SECURE Act of 2019, the legislation instituted numerous changes to the laws governing retirement plans.

Although these changes—which affect everything from required minimum distributions (RMDs) to inflation adjustments—can be a bit bewildering, meeting with an experienced financial planner or estate attorney can help you get a firm handle on how these new wrinkles will affect your retirement. If you are yourself a financial or wealth planner, it will also give you a great leg up on new sales opportunities.

RMDs, IRAs, and More

Here are a few of the most significant changes in SECURE 2.0

• RMD Flexibility. Tax-deferred retirement accounts—such as a (401)k or an IRA— require holders to take required minimum distributions beginning at a certain age. The 2019 SECURE Act raised the age from 70 ½ to 72 and the new act now raises it to 73. In 2033, it will rise again to 75. In addition, SECURE 2.0 reduces the penalty for failure to take RMDs from 50 percent to 25 percent of the amount not withdrawn and can be further reduced to 10 percent if the holder addresses the issue in a timely manner.

• Increased Allowance for Catch-Up Contributions. For older Americans looking to increase the amount they set aside for retirement, so-called “catch-up contributions” have long been an effective way to achieve their savings goals. Previously, Americans age 50 or older were permitted to contribute an additional $6,500 a year towards their retirement accounts. The new regulations increased the amount for workers age 60-63 to $10,000, allowing them to provide a more secure future for themselves and their families. In addition, that amount will be indexed to inflation rates going forward.

• Automatic Enrollment for Workers. Whereas previously employees had to choose to opt in to a retirement plan, SECURE 2.0 requires most employers to automatically enroll their workers. These retirement plans must have an annual contribution rate of between 3 and 10 percent of the employee’s income and the employee can choose to opt out.

Get a Professional Opinion

In addition to these significant changes, SECURE 2.0 contains numerous other smaller alterations in the retirement laws. If you have concerns about how these will impact either your own retirement or, if you’re a financial planner, how this will affect your sales opportunities, speaking with an estate and tax professional is a must.

Contact The Law Firm of Christopher W. Dumm

If you have any questions about how this new legislation will affect your retirement, please do not hesitate to reach out to the Law Firm of Christopher W. Dumm. We have many years of experience helping people plan for their future, and we’re here to help. Give us a call at 417-623-2062 or fill out the contact form below.