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A Refresher on the SECURE Act 2.0 and a Recent Update to It

A Refresher on the SECURE Act 2.0 and a Recent Update to It Fitzwilliams Financial

The SECURE Act 2.0 was a major change in legislation passed in 2022 that drastically affected many areas of retirement planning.[1] It changed rules for many aspects of financial planning concerning retirement, but some of the most important changes were that it:

  1. Pushed back the age of RMDs[1]
  2. Changed some rules for catch-up contributions[1]
  3. Changed some rules about access to retirement funds before you retire[1]
  4. Enacted some rules for automatic retirement enrollment[1]

As the SECURE Act 2.0 was put into place and examined, there were some problems implementing some of its provisions due to the way the law was worded.[2] Some key changes were made fairly recently to ensure that essential provisions would work as intended.[2]

The SECURE Act 2.0 Drafting Error

One issue with the SECURE Act 2.0 was that, because of a drafting error in the proposed changes, catch-up contributions after 2024 would not be possible.[2] Thankfully, the IRS released a notice on August 25th announcing the change would be pushed to 2026, and the bill was updated so that there was no contradictory language.[3]

For context, the SECURE Act 2.0 changed the catch-up contribution rules as such: If you are between the ages of 60-63 in 2025, you will be able to make up to $10,000 in catch-up contributions.[4]  Also, starting in 2026, if you make more than $145,000, your catch-up contributions must be made using after-tax dollars (on a “Roth” basis, in other words).[4] Originally, the SECURE Act 2.0 was going to implement that change in 2024, but because of problems with enacting the rule, the IRS pushed back the date of implementation to 2026.[4]

What are catch-up contributions, you ask? Individuals age 50 or older are allowed to make additional contributions to their retirement accounts called “catch-up contributions.”[5] The idea is that many people earn the most during this phase of their lives, and this law can allow them to “catch up” if they didn’t make enough contributions to their retirement when they were younger. However, even if you aren’t in this situation, all individuals who are at least 50 years old can make catch-up contributions.

As you can see, the retirement planning process is a complicated one. Even lawmakers make mistakes when it comes to sorting out retirement! If you are looking for someone to guide you through the process of designing a retirement plan that factors in changes like these in a way that caters to your needs, consider reaching out to one of our professionals today for a complimentary review of your finances.

 

When consumer confidence hits a multi-decade low, it is completely natural for you to feel a sense of hesitation about your hard-earned savings. If you are approaching retirement, seeing prices rise while trying to figure out the right time to adjust your portfolio can feel incredibly stressful. However, this low confidence might actually be introducing a healthy dose of critical thinking into the market right now. Instead of rushing into investments out of a fear of missing out, I am seeing people take their time to analyze their moves before they act.

This deliberate pace could be a vital asset as we prepare for what might be a historic three trillion dollar wave of tech IPOs. The names hitting the market are incredibly popular, and the media hype may make you feel like you need to change your entire strategy to get a piece of the action. But we must look closely at the underlying reality: many of these massive firms are not yet profitable. The typical corporate fundamentals simply are not there yet.

Because of this, I believe you should treat these speculative assets with extreme caution, much like money you would take to Vegas. If you want to participate, you might consider limiting that exposure to no more than five percent of a well-diversified portfolio. You should never dismantle a carefully crafted, long-term retirement plan just to follow a market trend. Furthermore, you must realize that extreme trading volumes during these public launches could cause your orders to execute at vastly different prices than you originally intended. It pays to be patient and let the dust settle.

If you have questions about how these shifting market dynamics might apply to your personal retirement plan, our team is always here to help.

Key Takeaways

  • A drop in consumer confidence may encourage a healthier investment environment by forcing individuals to rely on critical thinking instead of emotion.
  • An upcoming wave of massive technology IPOs might generate significant media hype, but these companies may lack current profitability and traditional business fundamentals.
  • Investors should avoid allocating more than five percent of a diversified portfolio to highly speculative, unproven market assets.
  • Heavy trading volume during a major public offering could cause investment orders to execute differently than an investor expects.

Fitzwilliams Wealth Management, Inc. is an SEC registered investment adviser. FWM and Fitzwilliams Financial are affiliated companies. This content is for informational purposes only and should not be construed as personalized investment advice. We do not provide tax or legal advice. Investing involves risk. Media appearances are for informational purposes only and do not constitute an endorsement.
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