Exciting news for savers! The SECURE 2.0 legislation brings great opportunities to boost your tax-advantaged savings and hold onto them for longer periods. Let’s look into 3 of the key provisions that may be most relevant to higher net worth savers.

New rules for required minimum distributions (RMDs):

• Delayed start: The age for starting RMDs has been pushed back to 73, gradually increasing to 75 by 2033. This change is beneficial for seniors who don’t need immediate access to retirement funds. Now, they can keep their money sheltered in tax-advantaged accounts like 401(k)s, traditional IRAs, and other qualified retirement plans for a longer time.
• Waived for Roth 401(k) accounts: Similar to Roth IRAs, Roth 401(k) accounts will no longer be subject to RMD rules during the account holder’s lifetime. (Effective 2024.)
• Broader qualified charitable donation (QCD) rules: Individuals aged 70½ or older can now use a QCD to donate up to $100,000 directly from an IRA to a qualified charity. A QCD can be counted toward annual RMD requirements if certain rules are met. SECURE 2.0 also includes a one-time election for a QCD to a split-interest trust, enabling philanthropic goals while maintaining a lifetime interest in the income generated by the donated funds.

Supersized catch-ups and expanded Roth contribution options:

• Supersized catch-up contribution: Participants in defined contribution plans (401k) between the ages of 60 and 63 can now contribute up to $10,000 ($5,000 for SIMPLE plans) in catch-up contributions or 50% more than the standard catch-up amount, whichever is greater. (The catch-up limit for people aged 50 and older in 2023 is $7,500 and $3,500 for SIMPLE plans.)
• More Roth savings opportunities and requirements: SECURE 2.0 mandates that all catch-up contributions for employees earning more than $145,000 (adjusted for inflation) be made in an after-tax Roth account. Additionally, starting in 2023, small business owners can create Roth options for their SIMPLE and SEP IRAs, while larger employers can match contributions in 401(k) and 403(b) accounts with Roth dollars (Effective 2024).

529 to Roth IRA conversions for beneficiaries:

• Starting in 2024, up to $35,000 of unused 529 plan assets can be transferred to a Roth IRA, given certain conditions are met. The 529 plan must have been active for 15 years, with funds remaining in the plan for at least five years before transfer. The assets must be moved to an IRA for the same beneficiary. The conversion limit is equal to the annual Roth IRA contribution.
• Special note: The $6,500 annual Roth IRA contribution limit still applies. A $6,500 529 to Roth IRA conversion can be made in place of an annual Roth IRA contribution but not in addition to it.

In summary, the SECURE Act of 2022 provides more choices for estate, legacy, and tax planning, along with a potential benefit for intergenerational wealth transfer with tax advantages. However, it also brings various planning opportunities and possible outcomes, including complex tax situations. It’s recommended to consult a financial or tax advisor to understand how these changes may impact your specific circumstances.

Disclosures: For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third party data which may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article.