Secure Act 2.0 Changes for 2024: What You Need to Know
The Secure Act 2.0 is introducing important changes that add new layers to the original Secure Act. With 2024 on the horizon, we discuss some changes that could benefit you in the new year.
1. Access to Retirement Funds for Emergencies
A feature of the Secure Act 2.0 is greater ease in accessing retirement funds during emergencies. Starting in 2024, up to $1,000 annually for personal or familial emergencies can be withdrawn from retirement accounts without penalties. However, it’s essential to replenish this amount within three years before making another similar withdrawal.
The act also introduces pension-linked emergency savings accounts for employees earning under $150,000 annually. Treated like Roth contributions, employees can set aside up to $2,500 yearly into these accounts. The funds will grow tax-free and allow up to four tax-free withdrawals annually.
2. 529 Plans Rolling Over to Roth IRAs
The Secure 2.0 Act bridges the gap between 529 plans—tax-advantaged accounts designed for education savings—and Roth IRAs, a popular retirement savings instrument. Before this act, moving funds from a 529 plan to a Roth IRA was impossible. But come 2024, a lifetime total of $35,000 can be rolled over from a 529 plan to a Roth IRA, provided:
The 529 account has existed for 15-plus years.
Rollovers must adhere to the Roth IRA’s annual contribution ceilings.
Only 529 contributions and earnings more than five years old are eligible.
Additionally, the Roth IRA must be in the 529 plan beneficiary’s name, and the beneficiary must have earned income that matches or surpasses the transferred amount annually.
3. Catch-Up Contributions: The New Norms
Another area the Secure Act 2.0 has revamped is catch-up contributions—additional amounts that individuals age 50-plus can add to their retirement accounts over standard limits. Changes ushered in include:
In 2024, the IRA catch-up contribution limit will be indexed to inflation, allowing for potential incremental increases.
In addition:
Starting in 2025, savers age 60-63 can make a catch-up contribution of up to $10,000 annually or 150% of the standard catch-up contribution limit, adjusted for inflation.
Starting in 2026 (previously 2024), employees with previous-year earnings exceeding $145,000 will have to funnel all catch-up contributions into after-tax Roth accounts, a shift that could lead to higher taxes.
Other Changes
Secure 2.0 ends required minimum distributions for Roth 401(k)s in 2024. Previously, only Roth IRAs were not subject to RMDs.
In addition, domestic abuse victims can withdraw up to $10,000 from their IRA or 401(k) without penalty.
Employers can make matching contributions to 401(k)s based on a student loan payment, which would count as the employee’s 401(k) contribution. The idea is to offset student loan debt and allow employees to build retirement savings.
In Conclusion
The Secure Act 2.0 can provide valuable opportunities, and it could be helpful to discuss which changes would benefit you and how to take advantage of them. Our firm, based in Northern California and Utah, helps provide this guidance to clients as part of our ongoing wealth management.
Schedule a complimentary, 15-minute chat with a fee-only, fiduciary financial advisor today to discuss your personal situation.
This material was written in collaboration with artificial intelligence (ChatGPT) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor with offices in Granite Bay and Folsom, CA, and Lehi and Logan, UT. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country’s leading professional association of fee-only financial advisors.