Secure Act 2.0: The Top 3 Changes You Need to Know

Marshall Rathmell |

You might have heard about recent legislation known as Secure Act 2.0. SECURE Act 2.0 was included in the Consolidated Appropriations Act of 2023, which was signed into law on December 29, 2022. The original SECURE act was passed in 2019 and made many changes to retirement accounts. Most notably it reduced stretch IRAs to a 10-year window and raised the required Minimum Distribution (RMD) age from 70 ½ to 72. Seeing as how the new legislation is 400 pages long, with 90+ provisions, we decided to write a blog highlighting changes that might affect our clients.


Required Minimum Distribution Age Gets Pushed Back Again


RMD’s are once again moved back, but only for those who turn age 72 after December 31, 2022. The easiest way to determine your new RMD age is based on your birth year:


Born before 1951

No Change - RMDs started at age 72

Born between 1951-1959

RMDs begin at age 73

Born in 1960 or later

RMDs will begin at age 75


The result of this change, in the case of someone who turns 72 this year, is they will have their RMD age pushed back to 73. So, for those of you who have been preparing to start RMDs in 2023, you have another year to let your money grow tax deferred in your retirement accounts.


Tax Tip: While the additional years of tax deferred growth from delaying RMDs is sure to grow the balance of many retirement accounts, eventually RMDs will start, and will now be on a shortened timeline due to the delayed starting age. Without proper tax planning this could result in more taxable income squeezed into fewer years pushing retirees into a higher tax bracket than they otherwise would have been. More to come on this tax planning topic in future blogs.


529-to-Roth IRA Transfers


This provision is sure to be a common headline in the months to come and will be a valuable tool for many with plans to help fund a loved one’s education costs. However, like many tax laws, the list of exceptions and conditions are almost as important as the provision itself. To avoid tax and penalties on a 529-to-Roth transfer the following conditions must be met:


  1. The maximum amount that can be transferred from a 529 plan to a Roth IRA during an individual’s lifetime is $35,000 (per beneficiary).
  2. The annual limit for how much can be moved from a 529 plan to a Roth IRA is the IRA contribution limit for the year; all other IRA contributions in the same year also count against this limit.
  3. The 529 plan must have been in existence for at least 15 years
  4. The Roth IRA receiving the funds must be in the name of the beneficiary. (it is assumed that a change in beneficiary will not restart the 15-year clock, but we are awaiting guidance from the IRS on this topic).
  5. Any contributions to the 529 plan must remain in the plan for 5 years before it is eligible to be moved to a Roth IRA. This includes the earnings on those contributions.


Additional catch-up contributions allowed for employees age 60-63


SECURE Act 2.0 also adds a “special” catch-up contribution limit for those employees who are age 60 to 63 starting in 2025. In 2022 401(k) plans and other employer-sponsored retirement plans allowed catch-up contributions of $6,500 for workers age 50 and up. The special catch-up contribution begins in 2024 and will allow workers ages 60 to 63 to contribute the greater of $10,000 or 150% of the "standard" catch-up contribution amount. The $10,000 amount will be adjusted for inflation each year starting in 2026.


Starting in 2024, the SECURE 2.0 Act also requires all catch-up contributions for workers with wages over $145,000 during the previous year to be deposited into a Roth (i.e., after-tax) account.





If we had to summarize the bill in one sentence, it would be the “Rothification” of retirement savings. In addition to two of the big three changes listed above having Roth implications, many of the other 90+ retirement account provisions in the new law include additional Roth funding opportunities and requirements. Roth accounts appear to be a win-win in lawmakers’ eyes as they are popular with tax savvy savers, and they also increase government revenue in the short-term allowing them to “kick the can down the road” and meet budget window requirements. While we have concerns about the long-term budget impacts, we are also big fans of having greater flexibility with contributing to Roth accounts. We believe in not only being well diversified in asset allocation, but also asset location. Asset location meaning taxable, tax free, and tax deferred account types. This provides the greatest amount of flexibility and tax efficiency for our clients in retirement. 


As always, BCR is here to discuss any questions you have on how this impacts you. We will implement changes to our planning based on this legislation and future amendments.