SECURE Act 2.0 is reshaping retirement planning for working individuals and their families by expanding retirement savings opportunities, increasing the age for required minimum distributions (RMDs), and enhancing employer-sponsored plans.
Notably, among the most significant changes in this landmark legislation involves the IRS RMD rules. By increasing the starting age for mandatory withdrawals, retirement accounts grow tax-deferred for a longer period. It also increases catch-up contribution limits and expands Roth contribution options for greater flexibility in managing retirement assets.
For high-net-worth individuals like yourself, these changes create new opportunities to have more control over your savings and tax strategies while strengthening legacy planning. It’s in your best interest to familiarize yourself with the current SECURE Act RMD rules.
What is SECURE Act 2.0?
The SECURE Act 2.0, enacted in December 2022, is a comprehensive federal law designed to enhance retirement savings and strengthen the retirement system for employers and employees in the United States.
Building upon the original SECURE Act of 2019, this legislation introduces several key provisions to improve retirement security and update the IRS’ required minimum distribution (RMD) rules.
Evolution from the original SECURE Act
The original SECURE Act (Setting Every Community Up for Retirement Enhancement Act) of 2019 made significant strides in reforming retirement savings. For one, it increased the RMD age from 70.5 to 72. It also allowed long-term, part-time workers to participate in 401(k) plans.
Three years later, Congress introduced SECURE Act 2.0 as part of a broader effort to bolster financial readiness for retirement. The goal is to address the challenges many Americans face in securing sufficient retirement savings.
SECURE Act 2.0 for retirement builds upon the previous one by extending the RMD age, expanding automatic enrollment in plans, and introducing additional catch-up contribution opportunities. These enhancements aim to address the evolving needs of retirees and the workforce regarding greater flexibility and access to savings.
The legislation was incorporated into the Consolidated Appropriations Act of 2023 and became law on Dec. 29, 2022. The government is implementing provisions in phases, with key changes taking effect between 2023 and 2025.
Retirement Planning Under SECURE Act 2.0
The SECURE Act 2.0 introduces significant reforms to retirement planning, making it easier to save and offering greater flexibility for you and your family. Knowing these updates can help you improve your retirement plan and secure your financial future.
RMD age rules and penalties
SECURE Act 2.0 increases the required minimum distribution (RMD) age from 72 to 73 in 2023 and to 75 in 2033. This change lets retirees delay taxable withdrawals, giving their investments more time to grow tax-deferred.
The Act also lowers penalties for missing RMDs, reducing the excise tax from 50% to 25% and further to 10% if corrected within a specific timeframe. In another key update, Roth 401(k) accounts will no longer require RMDs starting in 2024, aligning with Roth IRAs and giving retirees more control over tax-free wealth accumulation.
Higher 401(k) catch-up contributions
Beginning in 2025, SECURE Act 2.0 raises catch-up contribution limits for those aged 60 to 63. Under SECURE 2.0, they can contribute up to $10,000 yearly (or 150% of the regular catch-up amount, whichever is higher) to 401(k), 403(b), and governmental 457(b) plans.
The Act also ties these limits to inflation, ensuring they adjust with rising costs. However, beginning in 2024, high earners making $145,000 or more per year must direct their catch-up contributions to Roth accounts. If you belong to this group, you’ll pay taxes upfront but benefit from tax-free growth and withdrawals in retirement.
Automatic enrollment changes
Starting in 2025, most new 401(k) and 403(b) plans must automatically enroll eligible employees at a contribution rate of at least 3% of their pay. This rate increases by 1% annually until it reaches 10%–15%.
Employees can opt out, but automatic enrollment significantly increases participation, especially among younger professionals who might not otherwise prioritize retirement savings. By guaranteeing steady contributions, this rule helps Americans build wealth through the power of compound interest.
Emergency withdrawal flexibility
SECURE Act 2.0 allows individuals to withdraw up to $1,000 yearly from their 401(k), 403(b), or IRA accounts for emergency expenses without paying the typical 10% early withdrawal penalty.
This provision helps cover unexpected costs without jeopardizing long-term savings. You can repay the withdrawn amount within three years—if you don’t, you lose the ability to make another penalty-free emergency withdrawal during that period.
The Act also lets employers offer emergency savings accounts linked to retirement plans, where lower-earning employees can save up to $2,500 in a penalty-free, accessible account.
529 plan Roth rollovers
As of Jan. 1, 2024, you can roll over up to $35,000 in unused 529 education savings plan funds into a Roth IRA without penalties or taxes. The 529 account must be at least 15 years old, and annual Roth IRA contribution limits still apply.
This update gives your family a tax-efficient way to convert unneeded education savings into retirement funds, making sure that excess 529 plan money continues to grow tax-free.
A student loan payment 401(k) match
Employers can match employee student loan payments with contributions to their 401(k), 403(b), or SIMPLE IRA plans. This provision lets employees build retirement savings while paying down student debt.
It benefits young professionals who may otherwise delay retirement contributions due to financial constraints. By leveraging employer-matched contributions, they can simultaneously reduce debt and prepare for their financial future.
The Implications of SECURE Act 2.0 for High-Net-Worth Individuals and Families
As a high-net-worth individual (HNI), you must adapt your investment, tax, and estate strategies to the updated SECURE Act for long-term wealth management.
Deferred RMD flexibility
By increasing the RMD age to 73 in 2023 and 75 in 2033, SECURE Act 2.0 allows you to delay taxable withdrawals, giving your retirement assets more time to grow.
It can be a massive advantage if you don’t need the money immediately and prefer to let investments compound tax-free. However, larger later-year withdrawals can push you into higher tax brackets, so planning is essential.
For example, if you have a $4 million IRA and delay distributions until 75, your balance could be significantly higher due to market appreciation.
While this strengthens your long-term financial security, it could trigger higher Medicare premiums and a larger tax bill when you finally withdraw funds. A well-timed Roth conversion plan could help ease your tax burden over time and provide more control over your taxable income in retirement.
Enhanced savings and contribution options
As mentioned, individuals aged 60 to 63 can contribute up to $10,000 more annually to their 401(k) or similar plans starting in 2025 due to higher catch-up contribution limits. If you’re a high earner, this option allows you to supercharge your retirement savings during your peak earning years.
However, one key change affects those making $145,000 or more annually—your catch-up contributions must go into a Roth account, meaning you’ll pay taxes upfront but enjoy tax-free withdrawals later.
If you anticipate being in a high tax bracket in retirement, this shift can provide long-term tax savings. For example, if you max out your Roth 401(k) catch-up contributions for five years, you could build a significant tax-free nest egg to draw from later.
Estate and beneficiary planning adjustments
If you plan to leave a large IRA to your heirs, SECURE Act 2.0’s 10-year withdrawal rule for most non-spouse beneficiaries could create unexpected tax burdens for your family.
Previously, heirs could stretch withdrawals over their lifetime, minimizing their annual tax liability. Now, they must liquidate the account within 10 years, which could push them into higher tax brackets and increase their overall tax burden.
For example, if your child inherits a $2 million IRA, they might have to withdraw $200,000 or more annually over 10 years—potentially at their highest tax rate.
To avoid this, consider Roth conversions, which allow heirs to withdraw funds tax-free. Alternatively, you may use a charitable remainder trust (CRT) to provide tax-efficient income while supporting a charitable cause.
Increased complexity in tax strategy
While SECURE Act 2.0 opens up more tax-efficient retirement savings opportunities, it also adds new layers of complexity that require a strategic approach.
For instance, delaying RMDs could increase the value of your estate, potentially pushing it above estate tax exemption thresholds. When that happens, there might be adjustments to trusts, gifting strategies, or charitable contributions.
Additionally, the shift toward Roth catch-up contributions for high earners means you may need to rethink how you allocate pre-tax and post-tax savings for optimal tax efficiency.
With so many considerations, you could tap a financial advisor who can help you balance short-term tax efficiency with long-term wealth preservation to ensure your retirement and estate plans remain aligned with your financial goals.
How to Make SECURE Act 2.0 Work for You
The SECURE Act 2.0 introduces significant changes that can help you save more for retirement, but maximizing its benefits requires a strategy tailored to your unique financial situation.
Stay informed and adapt
Tax laws evolve, and staying ahead of the latest IRS updates and SECURE 2.0 provisions means you don’t miss out on key benefits or face unexpected liabilities.
For example, the SECURE Act 2.0 gradually raises the RMD age, giving retirees more flexibility in managing withdrawals. Meanwhile, ongoing IRS tax updates can affect deductions, contribution limits, and estate planning strategies.
Regularly review these changes to determine if you must adjust your strategy as new provisions take effect.
Review and adjust your retirement plan
Your retirement plan isn’t static—it should evolve as new opportunities arise. With SECURE Act 2.0 extending the RMD age, you may need to reassess your investment allocations and withdrawal timing.
If delaying RMDs aligns with your financial goals, consider adjusting your portfolio to focus on tax-deferred growth. At the same time, reviewing your retirement timeline can help you decide whether early Roth conversions or other tax strategies will serve you better in the long run.
Optimize your contribution strategy
Higher contribution limits and catch-up provisions allow you to build your retirement savings aggressively. If you’re 60 to 63, you can take advantage of the new $10,000 catch-up contribution for 401(k) plans, giving you a last-minute boost before retirement.
Likewise, mandatory Roth catch-ups let you shift some savings into tax-free growth accounts. Adjusting your contribution levels can make a substantial difference in your long-term portfolio.
Refine your withdrawal approach
Planning withdrawals strategically can help minimize taxes and stretch your savings further. With RMDs delayed until 73 (and eventually 75), you may have extra time to take distributions at lower tax rates or convert pre-tax savings into a Roth IRA.
Diversifying your income sources—such as tapping into taxable accounts first while letting tax-deferred accounts grow—can optimize your tax efficiency. Additionally, remember that SECURE Act 2.0 allows limited penalty-free withdrawals for emergencies. You could tap into that financial solution without disrupting your savings or retirement assets.
Revisit your estate and beneficiary planning
Estate planning needs a fresh look under the new rules, especially with changes to inherited IRAs. If you plan to leave a significant IRA balance to heirs, they will likely need to withdraw the full amount within 10 years, potentially increasing their tax burden.
Reviewing your beneficiary designations and exploring alternatives—such as charitable remainder trusts or strategic Roth conversions—can help reduce taxes and preserve more of your legacy for your family.
Engage with a financial advisor
Even with a solid understanding of the law, navigating SECURE Act 2.0’s nuances can be complex. A financial advisor can guide you in updating your retirement strategy to maximize tax benefits while securing long-term wealth.
They can also help you structure withdrawals, adjust investments, and integrate estate planning changes into your financial picture. Regular check-ins with an advisor keep you ahead of legislative shifts and position your portfolio for sustained success.
Maximize Your Wealth, Minimize Your Taxes
SECURE Act 2.0 has reshaped retirement planning, offering new opportunities to grow wealth, minimize taxes, and enhance financial security.
You can take full advantage of these changes by adjusting your strategy—whether through delayed RMDs, optimized contributions, or updated estate planning. Staying proactive ensures your retirement savings work harder for you and your family.
To confidently navigate these updates, consider expert guidance and retirement planning services. Tencap Wealth Coaching can help you craft a personalized, tax-efficient plan that aligns with your financial goals. Start planning smarter. Contact us today to secure your future.
Disclaimer: The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Utah or where otherwise legally permitted. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital.
Nick Carrigan
Nick trains and develops families in creating, maintaining, and growing wealth. This includes educating clients on the science and academics of investing, comprehensive financial planning, and ongoing coaching to ensure discipline for a lifetime. Nick has seen this create incredible levels of freedom, fulfillment, and love for the families he works with.
