SECURE 2.0: Rethinking retirement savings

The legislation enacted in the SECURE 2.0 Act provides a slate of changes that could help strengthen the retirement system—and Americans' financial readiness for retirement.

The law builds on earlier legislation that increased the age at which retirees must take required minimum distributions (RMDs) and allowed workplace saving plans to offer annuities, capping years of discussions aimed at bolstering retirement savings through employer plans and IRAs.

While SECURE 2.0 contains dozens of provisions, the highlights include increasing the age at which retirees must begin taking RMDs from IRA and 401(k) accounts, and changes to the catch-up contributions for older workers between the ages of 60 and 63 with workplace plans. Additional changes are meant to help younger people continue saving while paying off student debt, to make it easier to move accounts from employer to employer, and allowing retirement savers to start earlier by tapping unused 529 funds.

Here are 10 things SECURE 2.0 changes:

For people in or near retirement

1. Higher catch-up contributions. Starting January 1, 2025, individuals ages 60 through 63 years old will be able to make catch-up contributions to eligible retirement plans of $11,250, in place of their normal $7,500 catch-up in 2025.

Starting in 2026,¹ if you earn more than $145,000 in the prior calendar year, all catch-up contributions to a workplace plan at age 50 or older will need to be made to a Roth account in after-tax dollars. Individuals earning $145,000 or less, adjusted for inflation going forward, will be exempt from the Roth requirement.

IRAs have a $1,000 catch-up contribution limit for people age 50 and over. Moving forward, that limit will be indexed to inflation, meaning it could increase every year, based on federally determined cost-of-living increases. It will remain $1,000 for 2025, however.

2. Big changes to RMDs.

• The age at which owners of retirement accounts must start taking RMDs increased to 73, from 72, on January 1, 2023, so individuals will have an additional year to delay taking a mandatory withdrawal of deferred savings from their retirement accounts. If you turned 72 in 2022 or earlier, you will need to continue taking RMDs as scheduled. Good to know: SECURE 2.0 also pushes the age at which RMDs must start to 75 beginning in 2033.
• In 2023, the steep penalty for failing to take an RMD decreased to 25% of the RMD amount not taken, from 50% previously. The penalty will be reduced to 10% for IRA owners if the account owner withdraws the RMD amount previously not taken and submits a corrected tax return in a timely manner within 2 years.
• Additionally, Roth accounts in employer retirement plans are exempt from the RMD requirements as of 2024.
• And for in-plan annuity payments that exceed the participant's RMD amount on the annuity for the year, if applicable, the excess annuity payment can be applied to the year's RMD.
• Learn more in Viewpoints: A little-known way to satisfy RMDs.

3. Matching for Roth accounts. Employers will be able to provide employees the option of receiving vested matching contributions to Roth accounts (although it will take time for plan providers to offer this and for payroll systems to be updated). Previously, matching in employer-sponsored plans was made solely on a pre-tax basis. Contributions to a Roth retirement plan are made after-tax, after which earnings can grow tax-free.

Important to know: As of tax year 2024, RMDs from an employer-sponsored plan are no longer required for Roth accounts.

4. Qualified charitable distributions (QCDs). As of 2024, people who are age 70½ and older may elect as part of their $108,000 annual QCD limit in 2025 a one-time gift up to $54,000, adjusted annually for inflation, to a charitable remainder unitrust, a charitable remainder annuity trust, or a charitable gift annuity. This is an expansion of the type of charity, or charities, that can receive a QCD. This amount counts toward the annual RMD, if applicable. Note, for gifts to count, they must come directly from your IRA by the end of the calendar year. QCDs cannot be made to all charities. 

Read more in Viewpoints about the basics of QCDS.

5. Other changes for annuities. Qualified longevity annuity contracts (QLACs) got a boost. QLACs are deferred income annuities purchased with retirement funds typically held in an IRA or 401(k) that begin payments on or before age 85. The dollar limitation for premiums increased to $210,000 from $200,000 as of January 1, 2025. The law also eliminated a previous requirement that limited premiums to 25% of an individual’s retirement account balance.

For people years away from retirement

6. Automatic enrollment and automatic plan portability. The legislation requires businesses adopting new 401(k) and 403(b) plans to automatically enroll eligible employees, starting at a contribution rate of at least 3%, beginning in 2025. It also permits retirement plan service providers to offer plan sponsors automatic portability services, transferring an employee's low balance retirement accounts to a new plan when they change jobs. The change could be especially useful for lower-balance savers who typically cash out their retirement plans when they leave jobs, rather than continue saving in another eligible retirement plan.

7. Emergency savings. Defined contribution retirement plans are allowed to add an emergency savings account that is a designated Roth account eligible to accept participant contributions for non-highly compensated employees starting in 2024. Contributions are limited to $2,500 annually (or lower, as set by the employer) and the first 4 withdrawals in a year would be tax- and penalty-free. Depending on plan rules, contributions may be eligible for an employer match. In addition to giving participants penalty-free access to funds, an emergency savings account could encourage plan participants to save for short-term and unexpected expenses.

8. Student loan debt. As of 2024, employers are able to "match" employee student loan payments with matching payments to a retirement account, giving workers an extra incentive to save while paying off educational loans.

9. 529 plans. After 15 years, 529 plan assets can be transferred to a Roth IRA for the designated beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000. The transfer amount must come from contributions made to the 529 account at least 5 years prior to the 529-to-Roth IRA transfer date. The transfer is treated as a contribution toward the annual Roth IRA contribution limit for the 529 plan beneficiary.²

10. 401(k) disaster distributions, loans, or hardship withdrawals. If your workplace retirement plan allows for it and if you meet certain other requirements, you may be able to take a qualified disaster recovery distribution from your 401(k). The SECURE 2.0 Act expanded distribution options and favorable tax treatment for up to $22,000 of qualified disaster recovery distributions from eligible plans. The associated income tax can be spread over subsequent years and you may have the option to recontribute the funds. To learn more, visit the IRS websiteOpens in a new window and consult your workplace plan documents. Another possible option, if permitted by your plan, could be a loan from your 401(k) to cover losses that aren't covered by insurance, savings, or other relief funds up to a maximum of $50,000. And only if necessary, you could apply for a hardship withdrawal. Consider this as a last resort, though, because you'll owe income tax and possible penalties on your withdrawal and you'll lose out on the potential growth of that money.

While SECURE 2.0 provides increased opportunities to save for retirement, everyone's financial situation is different. As always, consult your financial advisor or tax professional to understand how SECURE 2.0 changes apply to you.