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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 people think about retirement planning, they often focus on one question: How much money will I need?

I believe another question can be just as important: What will that money be able to buy?

Inflation can gradually change the cost of groceries, housing, healthcare, transportation, travel, and many of the other expenses people may encounter throughout retirement. As those costs change, the purchasing power of a dollar may change with them.

That is why retirement planning can involve more than building an account balance or reaching a particular savings target. A comprehensive financial plan may also need to consider future

spending, retirement income needs, time horizon, inflation, investment strategy, and how someone’s financial circumstances could evolve over time.

In this Financial Forecast discussion, I explore how inflation can affect everyday expenses and why purchasing power may matter when evaluating a long-term retirement strategy. I also discuss why investors may benefit from looking at their financial decisions within the broader context of their goals rather than focusing on any one economic factor in isolation.

No one can know exactly what prices, markets, or economic conditions will look like years from now. Planning can instead involve evaluating different possibilities and building a strategy that may be able to adapt as circumstances change.

Watch the video to learn more about how inflation and changing expenses can fit into the retirement planning conversation.

Fitzwilliams Wealth Management, Inc. is an SEC registered investment advisor. FWM and Fitzwilliams Financial are affiliated companies. The content in this video is for informational purposes only and is not personalized investment advice or a solicitation to buy or sell any security. We do not provide tax or legal advice. Media appearances are for informational purposes only and do not constitute an endorsement. Investing involves risk.
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