secure 2.0 becomes law

The SECURE 2.0 Act is now law. The legislation provides a slate of changes that could help strengthen the retirement system—and Americans' financial readiness for retirement. Here are some of the major takeaways: 

  • The age at which owners of retirement accounts must start taking RMDs will increase to 73, starting January 1, 2023. The current age to begin taking RMDs is 72, so individuals will have an additional year to delay taking a mandatory withdrawal of deferred savings from their retirement accounts. Two important things to think about: If you turned 72 in 2022 or earlier, you will need to continue taking RMDs as scheduled. If you're turning 72 in 2023 and have already scheduled your withdrawal, you may want to consider updating your withdrawal plan. Good to know: SECURE 2.0 also pushes the age at which RMDs must start to 75 starting in 2033.

  • Starting in 2023, the steep penalty for failing to take an RMD will decrease to 25% of the RMD amount not taken, from 50% currently. The penalty will be reduced to 10% for IRA owners if the account owner withdraws the RMD amount previously not taken and submits a corrected tax return in a timely manner.

  • Starting in 2024, employers will be able to "match" employee student loan payments with matching payments to a retirement account, giving workers an extra incentive to save while paying off educational loans.

  • After 15 years, 529 plan assets can be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000. 

 This week's highlight article provides more detail on the items above and also highlights other areas of the SECURE 2.0 Act that will have a large impact of the lives of Americans.

Hikes in review

With inflation reaching levels not seen in 40 years, the Federal Reserve took aim at a soft landing and believed there was a plausible path to avoid a recession. With that goal in mind, the Fed instituted a series of interest rate hikes that were the most aggressive in decades. The chart below shows just how dramatic the current hiking cycle has been relative to previous tightening regimes. 

 
 

What Else We're Reading

 
 

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