Jan 24, 2023

10 Important Changes to Retirement Planning

Weekly Market Commentary

At the end of last year, Congress passed the SECURE Act 2.0, a follow-up to an overhaul of retirement laws passed just three years ago. The changes make it easier to save for retirement and may stretch out your savings while in retirement.

Major Provisions

  1. The penalty for failing to take a required minimum distribution (RMD), from a retirement account that requires such a distribution, drops to 25% from 50%. If the missed RMD is taken in a timely manner and an updated tax return is filed, the penalty is reduced to 10%.
  2. More importantly, a key provision raises the age for an RMD to 73 years old from 72, starting in 2023. The age rises to 75 in 2033.
    • If you turned 72 in 2022, you’ll stick with the previous schedule. If you turn 72 this year, you may delay your RMD until 2024, when you turn 73. Starting in 2033, the age for an RMD rises to 75.
  3. If you are enrolled in a Roth 401(k), you won’t be required to take an RMD from your Roth 401(k). That begins in 2024.
  4. Starting in 2025, companies that set up new 401(k) or 403(b) plans will be required to automatically enroll employees at a rate between 3 – 10% of their salary. Employees may choose to opt out, but we believe that saving for retirement is non-negotiable.
  5. Starting next year, employers will be allowed to match student loan payments made by their employees. The employer’s match must be placed in a retirement account.
  6. In 2025, 2.0 increases the catchup IRA provision, for those between 60 and 63, from $6,500 in 2022 ($7,500 in 2023 if 50 or older) to $10,000. The amount is indexed to inflation. Catchup dollars are required to be made into a Roth IRA unless wages are under $145,000.
  7. Victims of abuse may need cash for various reasons, including funds to remove themselves from a difficult situation. 2.0 allows a victim of domestic violence to withdraw the lesser of 50% of an account or $10,000 penalty-free.
  8. You may withdraw up to $22,000 penalty-free from an IRA or an employer-sponsored plan for federally declared disasters.
  9. Starting in 2024 and subject to annual Roth contribution limits, assets in a 529 plan may be rolled into a Roth IRA, with a maximum lifetime limit of $35,000. The 529 plan must be at least 15 years old and in the beneficiary’s name.
  10. The law allows for a one-time $50,000 distribution to a charity(s) through charitable gift annuities, charitable remainder annuity trusts, and a charitable remainder unitrust. This will count towards your RMD. You must be 70 ½ years old or older.

Many have failed to save for retirement, and the bill addresses some obstacles Americans face.

Our summary is not all-inclusive. It is a high-level overview. If you have questions, please let us know. Feel free to speak to your tax advisor about any tax-related questions.

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Advisor. Securities offered through Valmark Securities, Inc., Member FINRA/SIPC | 130 Springside Drive Suite 300 Akron, OH 44333-2431 | 800.765.5201. FDP Wealth Management, LLC is a separate entity from Valmark Securities, Inc. If you do not want to receive further editions of this weekly newsletter, please contact me at (949) 855-4337 or e-mail me at info@fdpwm.com or write me at 8841 Research Drive, Suite 100, Irvine, CA 92618. FDP Wealth Management, LLC, Valmark Securities, Inc. and their representatives do not offer tax or legal advice. You should consult your tax or legal professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.


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