SECURE Act 2.0 Insights

At Bowers Private Wealth Management, one of our key duties (and sources of enjoyment) is to monitor changes in regulations that will affect our client base.  From time to time, we tend to get pretty excited about changes that can enhance our planning efforts. 

The clients that we serve are primarily Small Business Owners (entrepreneurs, closely-held companies and sole proprietors) and Executives (at IT and Biotech firms).  So, in this update, we wanted to share a few of the new provisions that will affect our client base the most. 

As you may (or may not) have noticed, Congress recently passed the Secure Act 2.0 with the goal being to expand and increase retirement savings.  While we view most of these changes in a positive light, each change comes with its own set of complexities that are best considered within a well-developed comprehensive financial plan.

Here are some of the highlights that might pique your curiosity:

• RMD’s (Required Minimum Distributions) have been pushed back to age 73 (from 72) and eventually 75.  So, if you were born between 1951 and 1958, you’ll start at age 73.  And, those of you born 1959 or later will start at age 75.
• Beginning in 2024, unused 529 Plan assets can be transferred to the Roth IRA of the beneficiary as long as the account has been maintained for over 15 years.  The lifetime maximum for this is $35K subject to the usual annual Roth IRA contribution rules.  Contributions (and their respective gains) from the past 5 years, aren’t eligible
• When setting up a retirement plan for your Small Business (or Sole Proprietorship), you have a plethora of choices these days.  Thanks to the Secure Act 2.0, Roth Simple IRA’s and Roth SEP IRA’s are now possible along with other types of plans (pending policy and procedural updates) 
• Roth Employer Contributions (taxable to participant) – we have been waiting on this option for a long time as ‘traditional’ pre-tax deferrals aren’t always the best solution for participants but are certainly better than nothing
• Roth Catch-Up Contributions – required for those who earned wages north of $145K the previous year (subject to some interesting ‘quirks’ of course!)
• Catch-up contributions indexed for inflation and increased catch up options for those in their early 60’s
• Expanded options for surviving spouse beneficiaries of retirement accounts.  There are quite a few planning opportunities to consider regarding this enhancement  
• Solo – 401(K) Plan deferrals can now be done retroactively for Sole Proprietors
• And thankfully, no new limits on back-door Roth contributions or Roth conversions!

Please keep an eye on our Blog, social media and newsletter for continued educational info.