10 Biggest Retirement Account Changes You Need to Know

Anyone saving for retirement got a big boost at the tail end of 2022 thanks to the SECURE Act 2.0. 

While the initial Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law in 2019, the 2022 revision introduced even more changes with additional benefits for retirement savers.

Read on to learn about the 10 most important changes to retirement savings that the SECURE Act 2.0 will roll out between now and 2024.

Once you reach a certain age, you must start making withdrawals from your employer-sponsored retirement account — and pay income tax on the money withdrawn. 

Until now, the required minimum distribution (RMD) age was 72, but the newest iteration of the SECURE Act ups that age to 73. 

If you have another source of income or other savings, this change means you can put off dipping into your tax-advantaged retirement account for a little while longer.

In the past, workers and retirees were required to take a required minimum distribution from employer-sponsored Roth 401(k) accounts, but not from Roth IRA accounts. 

Now, employer-sponsored Roths are also free of the RMD. You should be able to keep that money in your account penalty- and tax-free, if you so choose.

While you’ll still be penalized if you don’t take your IRS-mandated RMD in time, the penalties are now much lower: instead of paying a (frankly unbelievable) penalty of 50% of the amount you should have withdrawn but didn’t, your penalty will go down to 25%.

Even better, if you didn’t take an RMD from your IRA on time, you can whittle that penalty down further. Specifically, if you make the required withdrawal and resubmit your taxes with the correction, the penalty will drop to just 10% of the withdrawal.

If you saved money for college in a 529 savings account but your beneficiary never used the money, you can roll those funds into a Roth IRA for the beneficiary starting in 2024, penalty free.

Bear in mind that you can only roll over your 529 savings under certain conditions and with more than a few caveats. For instance, you can only roll over $35,000 in total without a penalty. 

Still, this new rule makes a huge difference for families who would otherwise have lost some of their hard-earned 529 savings to penalties and taxes.

Once you reach age 50, you’re usually allowed to make additional catch-up contributions to your 401(k) so you can gear up for retirement. With the SECURE Act, workers between ages 60 and 63 might be able to make up to $10,000 in catch-up contributions starting in 2025. Those extra contributions not only accelerate your retirement savings, but may boost your tax refund.

Starting in January 2025, most companies with employer-sponsored 401(k)s and 403(b)s must automatically enroll their qualifying employees in the retirement savings plan.

The minimum contribution amount must be at least 3% from each auto-enrolled employee, and employees can still choose whether they want to participate in their employer’s retirement plan. 

But the automatic enrollment should save employers and their workers time, stress, and money while making sure more Americans than ever can start saving for retirement and maybe even retire earlier than expected.

It can be hard to balance retirement contributions with paying off expensive student loan debt, but if you aren’t contributing to a retirement account, you can’t benefit from employer contribution matches. 

This can drastically impact your ability to save, a problem the SECURE Act aims to fix by letting payees count qualifying student debt payments as deferred income. 

Employers can then match their retirement contributions to the employee’s debt payment.

This aspect of the SECURE Act kicked in after December, 2023. If your employer does offer a contribution match, it might be worth talking to them to ensure you’re on the same page about your own student debt payments and your employer’s contribution matches.

Regulations previously prohibited employers from offering small, short-term financial incentives to employees who signed up for retirement plans. 

The SECURE Act 2.0 revises this rule so businesses can use immediate financial incentives, like low-limit gift cards, to motivate employees who might not sign up for plans otherwise.

Of course, small financial incentives can’t be paid for with assets from the retirement plan, and the financial motivators should have a low dollar limit. But this rule change took effect at the start of 2023, so here’s hoping your employer has leaned into incentivizing plan signups already.

In the past, employers sponsoring 401(k) retirement plans didn’t have to make those plans available to part-time workers; at least, not until those workers had been with the company for three years or met other eligibility requirements. The SECURE Act lowers the time requirement to two years, which should help more part-time employees start their savings.

As of 2024, individuals can make withdrawals, without penalty, of up to $1,000 per year for emergency expenses. That money can be paid back to the retirement account within three years, and no more may be withdrawn within the three-year repayment period unless it is paid back. But, in a real emergency, you can tap into those savings.

Individual survivors of domestic abuse can also remove a limited amount of cash from their retirement accounts without incurring a 10% early withdrawal fee. Plus, if survivors pay back the amount of money they withdrew, they’ll receive a refund on any income tax they paid on the money they eventually use to refund their retirement accounts.

The SECURE Act’s changes to the tax rules around retirement savings should make it easier for you to save more money and to access funds on your own timetable. 

Bear in mind, though, that each change comes with its own qualifications. 

Use the time between now and then to learn more about the changes we listed here and make the most of your savings accounts this year.