SECURE 2.0 Provides Positive Changes For Retirement Benefits in 2023

Many provisions will strengthen Americans’ ability to save for retirement by restructuring contribution limits, withdrawal rules, and more. Some retirement benefits will begin on January 1, 2023, or be effective in later years.

These retirement benefits add to recent improvements for savers and retirees in social security and Medicare, discussed in this related post. After a challenging year with high inflation, rising interest rates, and a bear market, there is something positive to cheer about.

Increasing the Age For Required Minimum Distributions Your required minimum distribution (RMD) is the minimum amount you must begin withdrawing from your account each year or face penalties.

Retirement Benefits

A Drop In Penalties Section 302 will reduce penalties for not making RMD withdrawals on time to 25% of the required amount, down from a steep 50%. The penalty will drop to 10% if the taxpayer corrects the error promptly.

Eliminates Roth 401K Plans Section 325 eliminates the RMDs for pre-death Roth 401K and 403(b) plans, starting in 2024. Roth IRAs were not subject to RMDs while the owner was alive.

Boosting Qualified Longevity Annuity ContractsBath Bombs

Under the current rules, many retirees don’t need to tap their retirement money except for compliance with RMD rules. You can avoid taking RMDs until later in retirement, as a QLAC’s deferred annuity account value is free of RMDs until you are 85.

Employers Expand Automatic Enrollment in 401K and 403(b) Plans Starting in 2025, in Section 101, employers must automatically enroll participants into 401K or 403(b) plans upon eligibility for their plans. Initially, enrollment will be at a rate of at least 3% but not more than 10%, with a 1% increase annually until it reaches 10%.

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