On Dec. 29, 2022, President Biden signed the Consolidated Appropriations Act, 2023 (H.R. 2617) into law, which includes $1.7 trillion in fiscal year (FY) 2023 discretionary government funding. Along with the 4,000+ pages of the law came language known as the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0. This second version of the SECURE Act, like its predecessor passed in late 2019, brings a flurry of changes to America’s retirement planning landscape. The following is a quick overview of some of the provisions of SECURE Act 2.0 that we view as most impactful – both now and in the coming years.
Required Minimum Distributions
As with the original SECURE Act, we find that Required Minimum Distributions (RMDs) are pushed back once again. In the original Act, RMDs were pushed back 18 months, from the year which you turned 70.5 to the year which you turned 72. With SECURE Act 2.0, the year in which you begin RMDs is determined by your year of birth, as illustrated in the chart below courtesy of Kitces.com.
Qualified Charitable Distributions (QCDs)
While no changes were made to the age at which they can begin, QCDs were modified in two ways. First, starting in 2024, the QCD limit of $100,000 per year will become indexed to inflation. Second, starting in 2023, taxpayers may take advantage of a one-time opportunity to use a QCD to fund a Charitable Remainder UniTrust (CRUT), Charitable Remainder Annuity Trust (CRAT), or Charitable Gift Annuity (CGA). While this second change may seem appealing from an estate planning perspective, this one-time opportunity is limited to $50,000 (indexed to inflation) and carries a large subset of other contingencies that limit its true planning utility.
Other Noteworthy Changes
- Matching Roth Accounts
- IRA Catch-up Contributions
- 529 Plan Changes
- Emergency Withdrawals
- Automatic 401(k), 403(b) enrollment
While SECURE 2.0 provides increased opportunities to save for retirement, everyone's financial situation is different. We can help you make sense of the new rules.
Bay Point Wealth offers investment management, financial planning, and tax preparation services to a wide range of clients from young professionals to business owners and retirees. As clients' needs change over time, the firm has the services to meet those needs.
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Bay Point Wealth has offices in Annapolis and Stevensville Maryland. Schedule an initial planning session by calling 410-626-8198 or visiting our website at baypointwealth.com.
