SECURE Act 2.0 – Key Highlights for Taxpayers

Marcus by Goldman Sachs is excited to share this insight from our colleagues at Goldman Sachs Personal Financial Management. The original article can be viewed here.

March 17, 2023

Share this article

Signed into law in December 2022, the SECURE Act 2.0 aims to close gaps across the retirement system and help Americans better save for their future financial needs.

In an ever-evolving financial and retirement planning landscape, many of the act’s key provisions attempt to solve for obstacles that have historically made it difficult to balance current financial needs with retirement planning.

In this article, we’ll go over the following key provisions from SECURE Act 2.0:

Changes to Required Minimum Distributions (RMDs) and Qualified Charitable Distributions (QCDs).
Mandatory Roth treatment of catch-up contributions for certain individuals and ability for employers to allow Roth treatment of matching contributions.
Rollover treatment of a 529 college savings plan.

If you have any questions about how these provisions may impact you, consult a tax professional or your financial advisor.

Changes to Required Minimum Distributions and Qualified Charitable Distributions

Prior to SECURE Act 2.0, participants are generally required to begin taking RMDs from their retirement plan at age 72.

SECURE Act 2.0 increases the age to 73 in 2023 and 75 in 2033 depending on your year of birth.

Also, previously, if an individual failed to take their RMD, they faced a 50% excise tax penalty. Under the new law, the penalty for failing to take an RMD is reduced to 25%. And it can be further reduced to 10% if the failure is corrected within a certain time frame.

In addition to the RMD changes, the law changed the rules for Qualified Charitable Distributions (QCDs). The $100,000 annual income exclusion for IRA QCDs will now be indexed. A one-time QCD of $50,000 (also indexed) will also be allowed through charitable gift annuities, charitable remainder unitrusts, and charitable remainder annuity trusts.

“Rothification” of catch-up contributions

After 2023, all catch-up contributions by participants of 401(k), 403(b) and governmental 457(b) plans who earn over $145,000 (indexed) annually must be on a Roth (after-tax) basis.

Employer contributions can also be treated as Roth contributions. Under the new law, employers may permit participants to designate matching or non-elective vested contributions as Roth.

529 accounts can be rolled over to a Roth IRA

Effective in 2024, certain assets in a 529 college savings account can be rolled over tax-free into a Roth IRA for the 529 beneficiary where the account has been maintained for more than 15 years.

Rollovers are subject to Roth IRA annual contribution limits as to the beneficiary, but not subject to the income limits. Rollovers are limited to a lifetime limit of $35,000 and apply only to contributions to the account (and earnings) before the five-year period ending on the rollover date.

United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC (“GS&Co.”) and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization. Advisory services are offered through United Capital Financial Advisers, LLC and brokerage services are offered through GS& Co., member FINRA/SIPC.

GS PFM makes recommendations based on the specific needs and circumstances of each client. Clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing piece to make decisions. Investing involves risk, and investments may lose value. There are no investment strategies that guarantee a profit or protect against loss.

GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances.

The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. The material is based upon information which we consider reliable, but we do not represent that such information is accurate or complete, and it should not be relied upon as such. The information, data, analyses, and opinions contained herein include confidential and proprietary portfolio information of GS PFM, may not be copied or redistributed for noncommercial or personal purpose without GS PFM’s expressed permission.

All names, logos, and slogans identifying GS PFM or GS PFM’s products and services (including, without limitation, HonestConversations®, MoneyMind®, FinLife®, Financial Control Scorecard®, Live Richly., We Help You Live Richly., Helping People Live Richly®, One Best Financial Life®, Ideal Life Index®, GuideCenter®, InvestmentViewfinder., GS PFM Financial Life Management®, and Financial Years of Freedom.) are trademarks and service marks or registered trademarks and service marks of GS PFM or its affiliates in the United States and/or other countries.

Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA, which is an affiliate of United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management.