SECURE Act and SECURE 2.0 Act

The SECURE Act (2019) and SECURE 2.0 Act (2022) are federal laws that made sweeping changes to retirement savings rules, including raising the RMD age, expanding access to retirement plans, and modifying rules for inherited IRAs. These laws affect nearly everyone saving for or already in retirement.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law in December 2019, introduced significant changes to the retirement planning landscape. Among the most impactful provisions were raising the RMD age from 70½ to 72, eliminating the age limit for Traditional IRA contributions, and changing the rules for inherited retirement accounts by introducing a 10-year distribution requirement for most non-spouse beneficiaries.

The SECURE 2.0 Act, passed in December 2022, built upon the original law with additional reforms. Notable changes include further increasing the RMD age to 73 (effective 2023) and eventually to 75 (for those born in 1960 or later), reducing the penalty for missed RMDs from 50% to 25% (or 10% if corrected promptly), allowing employer Roth matching contributions, creating a new Roth option for SEP and SIMPLE IRAs, and indexing catch-up contribution limits to inflation.

For younger savers, SECURE 2.0 introduced provisions such as allowing employers to make matching contributions to retirement plans based on employees' student loan payments, automatic enrollment requirements for new 401(k) and 403(b) plans, and the creation of emergency savings accounts within retirement plans. These provisions are being phased in over several years.

The changes to inherited IRA rules under the original SECURE Act have been particularly significant for estate planning. The elimination of the "stretch IRA" for most non-spouse beneficiaries means that inherited retirement account balances must generally be distributed within 10 years, which could create substantial tax obligations for beneficiaries. Proposed IRS regulations have added further complexity regarding whether annual distributions are required within that 10-year window.

Together, these laws represent the most significant changes to retirement legislation in over a decade, and understanding their provisions may be essential for making informed decisions about saving, withdrawing, and transferring retirement assets.

Why This Matters

The SECURE Act and SECURE 2.0 Act affect the timing of RMDs, the tax treatment of inherited accounts, catch-up contribution opportunities, and many other aspects of retirement planning. Staying informed about these changes could help you take advantage of new opportunities and avoid potential pitfalls in your retirement savings strategy.

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