Understanding the SECURE 2.0 Act changes in 2024 can help more Americans save for the future.
As we step into a new year, business owners and employers, especially those concerned with retirement benefits, are likely keeping a close eye on legislative changes that impact their obligations and opportunities. One such development is the SECURE 2.0 Act, which introduces significant updates to retirement savings laws in 2024. In this blog post, we’ll delve into what the SECURE 2.0 Act entails, its current status, and what these changes mean for employers and individuals preparing for retirement.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0, commonly referred to as SECURE 2.0, is a proposed piece of legislation aimed at further enhancing retirement security for Americans. Building upon the original SECURE Act passed in 2019, this updated version seeks to address ongoing challenges in retirement planning and adapt to the evolving needs of the workforce.
Among the key provisions of the SECURE 2.0 Act are measures to expand access to retirement savings plans, increase contribution limits, and facilitate greater flexibility in retirement planning. Additionally, the Act includes provisions to address longevity risk and encourage lifetime income options within retirement plans.
2024 is a big year for the SECURE 2.0 Act, with many new regulations coming into effect.
A whopping 42.8 million people in the United States currently have student loan debt, with an average loan debt balance of nearly $40,000. With high interest rates and the cost of living rising, many struggle to build their savings on top of making their monthly loan payments.
Starting in 2024, employers are able to make matching contributions for qualified student loan payments to 401(k), 403(b), or SIMPLE IRA plans. This will allow student loan borrowers to build their retirement savings while also paying down their student debt — without having to sacrifice one or the other.
When the unexpected happens, many turn to their retirement savings for help. But withdrawing from a retirement account can create extra costs.
SECURE 2.0 Act changes in 2024 includes two key updates that will offer some relief in these emergency situations.
New in 2024, you’ll be able to withdraw up to $1,000 from your retirement savings, without penalty, each year to cover personal or family emergencies. In addition, victims of domestic abuse under the age of 59½ can withdraw up to $10,000 from IRAs and 401(k)s without owing the penalty.
Also in 2024, employers will be able to offer automatic enrollment in an emergency savings account of up to $2,500. These savings will be linked to a retirement plan, but won’t be subject to the same penalty taxes as the funds in a retirement account.
529 accounts are a way to invest money toward a child’s future education. You may be able to deduct contributions to such funds from your state income tax, and you won’t owe tax on withdrawals as long as the money is put toward qualified education expenses.
Starting in 2024, money in a 529 account that goes unused can be rolled over tax-free into a Roth IRA. The 529 must have been open for at least 15 years, and lifetime rollovers max out at $35,000.
New changes for 2024 – $23,000 for individuals 50 and younger (a $500 increase from 2023); $30,500 for individuals 50+.
New changes for 2024 – $7,000 for individuals 50 and younger (a $500 increase from 2023); $8,000 for individuals 50+.
At a certain age, you’re required to start making annual withdrawals from your pre-tax retirement accounts, like an IRA or 401(k). The minimum dollar amount you must withdraw each year is called your Required Minimum Distribution, or RMD.
Previously, Americans had to start withdrawing their RMD when they reached 72 years of age. Anyone who didn’t withdraw their RMD faced a penalty tax of 50% of the required withdrawal amount.
SECURE 2.0 Act changes increased the age you must start withdrawing your RMD from 72 to 73 years of age. If you are turning 73 in 2024, this will apply to you. This will change again in 2033, when the required beginning date for RMD withdrawals will increase from 73 to 75. SECURE 2.0 also lowered the penalty fee from 50% to 25% of your required withdrawal amount.
Employers and those who are self-employed may open SIMPLE Roth IRAs and SEP Roth IRAs starting in 2024. They may also make after-tax Roth contributions into employee or employee-owner accounts. The employer Roth contributions are immediately vested, grow tax-free, and offer tax-free withdrawals if certain conditions are met.
In summary, the SECURE 2.0 Act represents a significant step forward in bolstering retirement security for Americans. With its focus on expanding access to retirement savings plans, increasing contribution limits, and promoting lifetime income options, the Act, and its changes in 2024 and beyond, holds the potential to positively impact both employers and individuals preparing for retirement.
Human Resources, including managing retirement options for employees, doesn’t have to be overwhelming. Partnering with HRO Resources, the HR experts, can help you save money, improve efficiency and handle all or some of the HR functions of your organization.
Whether you are a startup or a growing company with 50+ employees, HRO has the tools you need so you can focus on guiding your team to success.
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