As a woman, you want to be sure that your financial future is secure and that you have the tools available to make smart decisions about retirement planning and long-term savings growth. The SECURE (Setting Every Community Up for Retirement Enhancement) Act 2.0 has opened up new opportunities for women who are looking to make their hard-earned money work for them. Let’s go over some of the key points of the SECURE Act 2.0 and explore how you can benefit.
Under the SECURE Act 2.0, individuals aged 60 to 63 are now eligible to make catch-up contributions to their traditional IRAs or other qualified retirement plans such as 401(k)s or 403(b)s. These contributions will be indexed for inflation each year so that you can continue to save more as time goes on. This is great news for those who may not have had the opportunity to make full use of their retirement accounts during their working years but want to maximize their savings before they retire.
Roth IRA Contributions Through 401(k)/403(b) Plans
Starting in 2025, high-wage earners with employer-sponsored plans will be able to convert pre-tax assets like 401(k)s or 403(b)s into Roth IRAs without paying taxes on the conversion amount up front. This new law gives these individuals more control over their taxation amounts and allows them to decide when and how much they pay. With traditional IRAs, tax payments are required on withdrawals before age 59 ½ and can be quite hefty for those who have saved large amounts of money for retirement. On the other hand, Roth IRAs do not require tax payments at withdrawal as long as the individual is 59 ½ or older, which gives those who make use of this new legislation a clear advantage when it comes to retirement planning and being able to determine their own taxation amounts. Furthermore, if someone isn’t expecting to make significant withdrawals until after age 59 ½ then converting pre-tax assets into a Roth IRA puts them in an even better position than they were before because they will not incur any taxation at all when they eventually do begin withdrawing from their savings. Ultimately, this makes Roth IRAs an attractive option for high-wage earners who want more control over when they make tax payments and are looking for ways to maximize their retirement savings potential.
Required Minimum Distribution Age Increase
The SECURE Act 2.0 has provided a much-needed update to the RMD age, raising it from 72 to 73 years old. This gives individuals an extra year of deferment, allowing them more time to delay possibly withdrawing substantial amounts of money that could cause them to move into higher tax brackets. By delaying RMDs, individuals can potentially benefit by having their withdrawals spread out over a longer period of time and can take advantage of changes in tax rates within their financial bracket as they increase in age and income.
529 Plan Rollover into a Roth IRA
The act has also created a great opportunity for future generations to jumpstart their retirement savings and fund college expenses simultaneously. The 529 rollover provision allows up to $35,000 from a 529 plan to be rolled over into the Roth IRA of the 529 beneficiary. The rollover is subject to meeting certain requirements, such as the 529 must have been established and maintained for at least 15 years and any contributions made within 5 years are not eligible. This provision helps put families’ minds at ease about what should be done with unused funds in their 529 plan and addresses worries about funds not being used for educational purposes.
As we know, women are especially vulnerable to financial hardship in retirement. Between longer life expectancies and a tendency to take on caregiving responsibilities for our families, the likelihood that women will enjoy a worry-free and comfortable retirement remains slim. However, from catch-up contributions to Roth IRA conversions, the SECURE Act 2.0 has opened up a host of possibilities that can help you maximize your retirement savings potential and secure your future.
At The Humphreys Group, our advisors work to ensure our clients are prepared to reach retirement with both financial security and the ability to enjoy their journey for years to come. Please reach out if you have questions about your retirement plan or need a second opinion on your approach.