In 2019, at the Landaas & Company Investment Outlook Seminar, Dave Sandstrom explained new federal provisions known as the SECURE* Act. After a pandemic hiatus, the in-person seminar returned in September 2023, and Dave updated clients on how the laws were revised.
“Apparently, the government thought that there wasn’t nearly enough confusion caused,” Dave said, “so they went back to the well and introduced the SECURE Act 2.0. This was a 350-page piece of legislation affecting nearly 100 changes to retirement plans and general tax code provisions surrounding that.”
In a brief presentation, at both morning and afternoon seminars at the Ingleside Hotel, in Pewaukee, Dave shared some of the highlights of what investors should know of the revisions. He divided the highpoints in three parts.
Required minimum distributions (RMDs)
Starting age
Rising from 72 years old to
- 73 – for anyone born between 1951 and 1960
- 75 – for anyone born in 1959 and later
“Now, for those of you paying attention, you’re recognizing that anybody born in 1959 falls into both categories. So that’s further proof that nobody in Washington actually read this bill,” Dave said to a response of laughter. “We are promised to get further clarification on that by year’s end.”
Penalties for not taking an RMD
Previously at 50% of the amount that was supposed to be withdrawn, the penalty has fallen to 25% and can be reduced to 10% if withdrawn within two years of the initial deadline.
Dave said tax experts have noted that the IRS seldom enforced the 50% penalty, and the lower penalties suggest the agency will be taking violations more seriously.
“Most people are leaning towards this being a message from the IRS saying, ‘Don’t miss an RMD because you will be penalized,’” Dave said. “So that’s the takeaway here: Make sure you’re paying attention.”
Qualified Charitable Contributions (QCDs)
Even though the starting age for taking RMDs has risen, the ability to donate the distributions and save on taxes remains available beginning at age 70½.
401(k) retirement accounts
Roth 401(k)s
No longer subject to required minimum distributions
Catch-up contributions
- Tax advantages are subject to earnings tests for workers 50 and older, beginning at $145,000 in W-2 wages from the prior year.
- Higher tax-deferred limits are available to workers between the ages of 60 and 63.
Dave added that the wording of the catch-up revisions is still being finalized.
529 education saving plans
What’s not used for education can be converted to a Roth IRA.
- The 529 account must be open for at least 15 years.
- Conversions are subject to the annual contribution limits and earned income rules for Roth IRAs.
- Conversions have a lifetime limit of $35,000 per beneficiary.
Dave urged clients to approach their advisory teams to learn more about how the SECURE Act provisions affect their individual circumstances. Likewise, trusted tax professionals should be consulted on tax matters.
*SECURE stands for Setting Every Community Up for Retirement Enhancement
Click here or a Money Talk Video of the 2023 Investment Outlook Seminar.
Learn more
Examining the Highlights of the Secure Act 2.0, The CPA Journal
Catch-up contributions still permitted after 2023, from the IRS
Retirement Plan and IRA Required Minimum Distributions FAQs, from the IRS
(initially posted Oct. 5, 2023)
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