SECURE 2.0 is a complex piece of legislation that will have a big impact on 401(k) and 403(b) retirement plans and IRAs. In the episode of Money Hacks, we provide a few highlights on what this could mean for retirement plan investors and savers. Listen in as we explore a few of the immediate implications of SECURE 2.0 and how it could affect you and your retirement plan.
Any money questions you’d like answered? Our Money Hacks series is created from conversations we have with employees, investors, savers, and all people planning for their financial futures. What topics are on your mind for our next episode?
Video Transcript:
Hey, this is Alex, and it's episode 101 of Money Hacks. At the very end of last year, major retirement plan legislation was passed in the law called Secure 2.0, and I've probably received hundreds of emails from industry practitioners, financial institutions, and our vendor partners on what this means for retirement plans, investors, and savers.
The purpose of this video is for investors. If you're a participant in a 401(k) or a 403(b), and you've been hearing about this, what does this mean for you? Well, even though it has gone into law, a lot of the provisions don't take place until further on down the road, but there are some that happen here in 2023.
The biggest one for this year is that the age for RMDs required minimum distributions has gone up. Once again, previously it was 72, and that was actually an increase from age 70 and a half back a few years ago, and now starting 2023, it is age 73, which means if you were in a 401(k), an IRA or a 403(b), and you're retired, you have to start taking money out of those accounts beginning at age 73.
Now, if you already were subjected to RMDs in prior years, let's say you were 72 a couple of years ago and you start taking your RMDs, unfortunately, you don't get to change the clock. You have to keep taking those RMDs. That's really the big one for this year. There are some other interesting things with matching contributions being made as Roth as an option for 401(k) and 403(b) plans. It's not immediately available, but there will be some retirement plans that start allowing you as investors to maybe take the matching contribution as a Roth instead of a pre-tax contribution paying the tax now. But there are two big provisions next year that I think you'll be excited about as investors and savers.
The first one is employers can build in a student loan matching repayment program where the contributions you're making towards paying down and paying off your student loans can count towards you receiving the match on your 401(k) plan.
So, it allows you to pay down your loans and also starts accruing more money for your 401(k). Additionally, we're big proponents of building up emergency savings, ensuring you have money set aside for an unexpected expense, and starting next year it'll be easier for these to be linked to your 401(k). So just like through your payroll, you can have an emergency savings bucket or budget you start to build up.
Those are a couple of pretty cool things happening in 2024. The other big one that I think will be a little bit of a surprise for investors is if you are age 50 and over making catch-up contributions. So you're not only putting in the max in the 401(k) but you're doing the catch-up contribution that allows you to put a little more in because you're getting closer to retirement starting next year, 2024 those contributions have to be made as Roth for certain higher income earners, your income is over $145,000 a year. Much more to come.
We'll have a ton of resources on our website, MoneyNav for details about the Secure Act, if you have questions or if there's anything else we can do when it comes to navigating these new retirement policy changes. Please feel free to reach out. Thanks and see you soon!