Secure Act 2.0 (Webinar)

The SECURE 2.0 Act is now law. The legislation provides a slate of changes that could help strengthen the retirement system—and Americans’ financial readiness for retirement.

The law builds on earlier legislation that increased the age at which retirees must take required minimum distributions (RMDs) and allowed workplace saving plans to offer annuities, capping years of discussions aimed at bolstering retirement savings through employer plans and IRAs.

While SECURE 2.0 contains dozens of provisions, the highlights include increasing the age at which retirees must begin taking RMDs from IRA and 401(k) accounts, and changes to the size of catch-up contributions for older workers with workplace plans. Additional changes are meant to help younger people continue saving while paying off student debt, to make it easier to move accounts from employer to employer, and to enable people to save for emergencies within retirement accounts.

Full Transcript

Hello everyone. My name is Jason Guenther and I’m a Wealth Advisor and the Chief Investment Officer at Stephens Wealth Management Group. I’m joined by Jill Carr, who’s also a Wealth Advisor here and is a CPA. Both of us have worked with Sherri Stephens in the firm here for about 10 years. We’re excited to share some emerging thoughts on SECURE Act 2.0 with you.

The act was passed right at the very end of 2022, and many of the details are still being worked out. With that said, there are some key topic areas that we think will be helpful for you. We’ve broken down the content for this webinar into two categories. One for individuals who are retired, and two for individuals who are still working. With that, let’s get started and I’ll turn it over to Jill.

Thanks, Jason. There are some meaningful changes that will come about as a result of SECURE Act 2.0. As some of you know, my name is Jill Carr. I’m a wealth advisor in the firm, and I’ve worked in most of our key departments, including client service, investment management, financial planning, and I also have a deep knowledge in tax planning, as I am a CPA. We’ve decided to start our webinar with topics related to retirees as that topic will be important to everyone at some point, even if you are not retired yet.

We will begin by talking about required minimum distributions or RMDs (as they are abbreviated) and are always a hot topic for retirees. There was a big change to the starting age with SECURE  Act 2.0, a long time ago, basically, people had to take a distribution from their pre-tax IRAs and pre-tax retirement account money at age 70 and a half.

That was the case for a long time. Where you had money in a tax-deferred account and the government let you defer taxes for a long time, and then when you reached a certain age, they decided you’ve had this money tax free long enough. We want you to start taking money out and paying some taxes on that.

The first SECURE Act, passed several years ago, pushed back the age to 72. With this latest iteration being referred to as SECURE Act 2.0, the RMD age is now being pushed back to age 73 for some and 75 for others. If you were born in 1950 or earlier, there is no change to your RMD age.  If you are born between 1951 and 1959, your RMD starting age is pushed back to age 73. And then if you were born in 1960 or later, your RMD age is being pushed back to age 75. Little caveat here at the bottom of the slide. Just because you don’t have to take a distribution doesn’t mean that you shouldn’t.

We’re always preaching about tax planning here at Stephens Wealth, and one of the issues with that is, you need to factor in how much is your income and where’s your tax bracket? By taking a distribution and paying some taxes on some of the money in a year that you don’t have to take a distribution, you may be able to play with the figures and get yourself into a lower tax bracket on some of that money. Rather than keeping it in the account and paying more taxes in a higher bracket later when you must take a higher mandatory distribution amount. It’s always something you want to be looking at: should I take some money out, even if the government says I don’t have to, because tax planning is important?

Now let’s talk about the penalty exceptions. Previously, if you did not take your RMD by the end of the year, then you were charged a penalty for this, and before the SECURE Act 2.0 was passed, it was 50% of the amount that you were supposed to take. That was the amount of the penalty. Now the law says it is 25% of the amount you were supposed to take and can be further reduced to 10% if you fix it during the correction window. The correction window begins the date that the tax is imposed, and it ends the earliest of either when the tax is assessed by the IRS, when the notice of deficiency is mailed to a taxpayer or the last day of the second tax year after the tax is imposed. If you figure out that you did not take an RMD and you now must pay the penalty, you can reduce your penalty to as little as 10% if you fix it properly. The statute of limitations on this begins upon filing out the form 1040 of the year that you were supposed to take the RMD.

There is no change to the qualified charitable distribution provision that is already in place for people who have IRAs and want to donate some of that money directly to a qualified 501c3 charity. You’re able to do this and keep the money from being taxed to you because it’s going directly from your IRA to the charity and therefore you are not going to pay tax on that distribution. There are no changes to how this is being done. Also, if you are still working at the age when your RMD is supposed to start, you can delay your RMD as long as you are basically just an employee of that company. If you own at least 5% of a company or more, you are not able to take advantage of the delay. You would have to take your RMD even if you were still working, however if you are an employee and you turn 73, and that’s when you’re supposed to take your RMD, but you’re still working and you’re not an owner of the company, then you are able to delay your RMD until you stop working. There are some changes to the way that surviving spouses as a beneficiary of an IRA can handle that transition.  Previously surviving spouse has had the ability to take the account as their own, and that is still an option. However, now you can also elect to be treated as the decedent, and then RMDs are delayed until the deceased spouse would have reached their RMD Age. For example, if the spouse was younger than you, you may want to consider this possibility so that you could delay taking money from the account until the deceased spouse would have reached their mandatory RMD age.  If the surviving spouse dies before the RMD begins, then whoever the spouse deemed as beneficiaries of the IRA can be treated as if they are original beneficiaries, as opposed to being a secondary beneficiary and then having to continue the way that the first kind of iteration happened as there are some complications with this.

Just ask us about if this applies to you. Unfortunately, there was no guidance given on the 10-year rule for non-spousal beneficiaries. One of the things that the first SECURE Act did was If you inherit an IRA or a 401k from someone that is not your spouse, like a parent or an aunt and uncle, then you have to withdraw that money out in a 10 year period after the person passed away.  Previously, you got to stretch it out over your lifetime and then they changed this so that the time period is kind of smooshed as to when you can take all the money out. There was some discussion as to whether that meant you had to take one 10th of the amount every year for 10 years, or you could wait to take it all in the 10-year period, you know, the last year. The IRS has been pretty silent on all of this. They did say that you must take at least something out every year, but there is no real clarification on what they mean by this. We will continue to update you as we find out new information. But the SECURE Act 2.0 did not address this provision.

For people who retire before age 59 and a half, there’s typically been a penalty to pull money out of retirement accounts, especially ones with tax deferral. If you are under that age, you would have to pay tax and penalty on the amounts you withdraw. The government is starting to realize, there are people who do retire before this age, especially those who work in some kind of public safety, like a policeman or firefighter, where they typically have a set number of rules before they retire you out. The SECURE Act 2.0 did expand this exception to include private sector firefighters, state and local corrections officers and plan participants who separate from service after 25 years. There may be an exception for you. If this does apply to you, feel free to ask us more about it.

We’re not going to go into a lot of detail here. There’s also an exception for terminal illness if you are qualified with a terminal illness diagnosis. This does apply to IRAs and employer plans. Again, there are rules and regulations. Please ask your advisor more about it if this applies to you.

Finally, one of the other ways that people get money out of a retirement account without being 59 and a half is to use what is called a 72T distribution. 72T is the name of the code section of the law that it applies to, and it’s basically a way for you to have a certain amount of money that you pull out, and you have to agree to do it for at least five years so that the government gets their tax money and then they don’t penalize you for being under age 59 and a half. You do have to be over 50 to take advantage of it. There has been a relaxation of these rules, so now annuity distributions can be used to satisfy some of this. There’s also some rules and regulations around this. And again, I repeat myself by saying, if this does apply to you, then ask us more about it because there are several nuances here. Now, Jason is going to talk to us about some of the catch-up provisions and some different changes in the law that apply to business owners and working employees.

Thanks Jill.  Now we’ll cover some key areas that apply to people that are currently working and saving for retirement.

The first is a higher catchup contribution.  Currently, if you’re age 50 or older, you can add an additional $7,500 this year to your 401k and similar type plans.  Beginning in 2025, if you’re between the ages of 60 to 63, the catch-up limit is increasing to the greater of either $10,000 or 50% more than the regular catch-up contribution, so it’ll be a great way to save some additional funds as you’re getting closer to retirement age.

In addition, if you’re a high wage earner, and in this case, it’s defined as those with wages above $145,000 in the previous year, (adjusted for inflation in the future). The SECURE Act 2.0 requires that catch-up contributions be made on a Roth basis. Beginning in 2024, this would apply to 401(k)s and 403(b)s, but not for IRAs.

Congress likes Roth contributions because the tax gets paid. If your income is under $145,000, you can elect either pre-tax or Roth contributions. Next, is that IRA catch-up contributions, (and this is if you’re age 50 and above), will now be indexed for inflation beginning in 2024, beyond the thousand dollars per year, that’s now in place. There’s also a provision that allows employers to make matching contributions to retirement plans like 401(k)s and 403bs. As Roth contributions. On the Roth side of the plan, prior to this, matching contributions were only available to be made as pre-tax contributions. There’s also a new option for employers to make matching contributions to an employee’s retirement plan based on qualified student loan payments beginning in 2024. This would give workers some additional incentive to save for retirement while paying off student loans. Another important change is that unused balances in 529 plans can now potentially be transferred to Roth IRAs for the first time starting in 2024. Most people use 529 funds for college expenses, but this could potentially be attractive for someone who has leftover funds. However, there are a number of stipulations around this, which include that the beneficiaries must have compensation in order to make the contributions, the rollovers are subject to the annual Roth IRA contribution limit, the account must have been opened for at least 15 years, and the maximum lifetime transfer is $35,000. If you qualify though, this could be an attractive way to move unused 529 plan balances into Roth IRAs for young people.

A couple of additional changes to note for people that have been making contributions to SEP and Simple IRA, is that it’s now possible for the first time to make Roth contributions to these types of accounts These plans have only allowed pre-tax contributions up until now. One thing that was not included in the SECURE Act 2.0, which many people were happy about, was any changes to the ability to make backdoor Roth IRA contributions where high earners make a traditional IRA contribution that’s non-deductible and then convert it to a Roth IRA, that strategy will continue to be available.

Overall, there were a number of important changes that were made recently, which built upon the first SECURE Act passed back in 2019. There should be more guidance coming out from the IRS around much of the details. We’ll provide more information about this as they become available.

We’d like to thank everyone for attending. If you have any questions for Jill or I, our phone number at the Flint office is (810) 732-7411, and my email address is and Jill’s is We hope that your 2023 is off to a great start.


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