How did the SECURE Act 2.0 change 401(k)s? Learn more about the important changes you should be aware of in this week's Arista Advice.
Hello, welcome to Arista Advice! Question of the week is: "Paul, how did the SECURE Act 2.0 change 401(k)s?" They changed a lot.
There's a lot of changes inside 401(k)s with SECURE Act 2.0. One of the big changes is if you have an old 401(k), there's going to be a database that's going to be created where you can get to those accounts a lot faster and a lot easier to have them follow you where they're going to go to your new 401(k) as you're enrolled there.
Number two, one of the biggest changes is removing RMDs for Roth 401(k) plans that are started after 2024. You can now have a Roth feature inside your 401(k) plan and have the RMDs waived. Really, really big news! Employers can now offer a Roth match for these plans starting after 2024, and that's going to be very beneficial to make the 401(k) plan more competitive.
Third, in 2025 participants that are ages 60 to 63, they have an increase for a catch-up contribution amount, which will be $10,000 or 150% of the regular catch-up contribution. So let's use for an example, Quentin, who works at a law firm. What amount of money can he put into a basic 401(k) plan? He can contribute the following money - $22,500 for a deferral, $7,500 for a catch-up, and another $3,750 because he's 60 plus catch-up. So starting in 2024, SEP IRAs, SIMPLE IRAs can allow for Roth contributions. Previously, SIMPLE and SEP IRAs could only include pre-tax funds. So some really good improvements to allow the average taxpayer and pre- retiree to get better prepared.
The conclusion? SECURE 2.0 gives us a lot of changes to IRAs, RMDs and more. Ask us how you can make sure to take advantage of the changes that come from SECURE 2.0 and watch our other Arista Advice videos for other updates to SECURE 2.0 and to enable you to have a secure retirement plan.
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