Retirement · September 03, 2024

Retirement Revisited: More SECURE Act Changes

First Citizens Wealth INTEL: Insights and News—Taxation, Election & Legislation

Each month, we'll provide time-sensitive updates on tax, election and legislation developments that could affect you.

The SECURE Act 2.0 of 2022 introduced sweeping changes to a range of programs designed to encourage retirement savings. In 2024, additional changes were enacted that may have further implications for retirement plans.

Who is impacted

The SECURE Act 2.0 changes affect the regulations governing qualified retirement plans, individual retirement accounts, or IRAs, and 529 education savings plans. If you're participating in any of these programs, you'll likely benefit from the changes that were introduced or planned for in the years ahead.

For example, if you contributed to a 529 plan to pay for educational expenses, you may now be able to convert a portion of those funds to a Roth IRA without penalty.

Employers are also impacted by SECURE Act 2.0 changes. For instance, employers may provide matching retirement plan contributions to employees based on the amount of their employees' student loan payments.

Examining critical changes for 2024

The majority of the SECURE Act changes for IRAs and qualified retirement plans provide more opportunities to add to your nest egg. Other updates give you more latitude with retirement account withdrawals and charitable distributions. Here's a summary of the more substantial changes to address when reviewing your retirement plans.

Notable IRA changes in 2023 and 2024

  • Qualified charitable distributions increased to $105,000—restrictions apply.
  • Up to $1,000 may now be withdrawn for emergency expenses without a 10% penalty—restrictions apply.
  • Victims of domestic abuse may now withdraw up to $10,000 without a 10% penalty—restrictions apply.

Notable qualified retirement plan changes in 2023, 2024 and beyond

  • More favorable financial options are now available for surviving spouses of qualified retirement plan owners.
  • Catch-up contribution amounts will significantly increase starting in 2025. However, catch-up contributions to qualified retirement plans are subject to Roth tax treatment.

Additional changes to consider

  • Missed required minimum distribution penalties have been reduced from 50% to 25%—restrictions apply.
  • Up to $35,000 of 529 college savings plan funds may now be rolled into inherited Roth IRAs without tax or penalties—restrictions apply.
  • Early withdrawal penalty exceptions are available for qualified disasters, public safety workers and people with terminal illnesses.
  • Additional withdrawal penalty exceptions are available for births and adoptions—and qualified long-term care expenses in 2025.
  • Additional employer contribution amounts are now available for small business owners offering SIMPLE IRA plans.
  • 401(k) participation can now be provided to part-time workers—stipulations apply.

Who you should talk to now

Most of the changes noted above have stipulations and restrictions. To fully understand how the SECURE Act 2.0 may impact your retirement plans, we recommend reviewing the legislation's section summary (PDF) developed by the US Senate Committee on Finance.

For additional information regarding the SECURE Act and its effect on your retirement strategies, speak to a First Citizens wealth consultant today.

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