The SECURE Act 2.0
The SECURE Act 2.0 brings key changes for retirement savers, especially physicians that include contribution adjustments. These changes offer new planning opportunities, particularly for high-income earners.
Selected Changes for Physicians
SECURE Act 2.0 was signed into law on December 29, 2022 and makes numerous changes that impact retirement savers and retirees. The new law raises the RMD age, increases retirement plan catch-up contributions, and provides enhancements to workplace retirement plans, along with many other changes. The following summary was presented by Mark Wallace CFP® at the Northwest Medical Society’s January meeting to Physicians:
Catch-up Contributions
Starting in 2024, if your 2023 W-2 shows more than $145,000 of income, your 2024 catch-up contributions must go into after-tax Roth, not pre-tax Traditional 401(k) or 403(b). This does not apply to Simple IRAs. That means a smaller tax deduction for you. If your Plan does not have a “Roth” option, then you can’t make any catch-up contributions at all.
Employer Retirement Plan catch-up contributions for people age 50 or older is $7,500 in 2023. Starting in 2025, participants between age 60-63 can make a larger catch-up contribution of up to $10,000.
529 College Savings Accounts
If you have a 529 College Savings account that was opened 15 years ago, or older, you can transfer it to a Roth IRA for the beneficiary subject to contribution limits. The beneficiary must have earned income and the lifetime maximum transfer is $35,000. Stay tuned, because this may be a way to make back-door Roth contributions for yourself.
Employer Matching Contributions
In 2024, if your employer allows it, you can direct your company matching contributions to go into Roth instead Pre-Tax. Your employer may also allow for matching your student loan payments and contributing that amount into your retirement account. We don’t know yet how this will be implemented.
Required Minimum Distributions
If you turned 72 this year (2023), your RMD is has been changed to age 73 and you can wait to take it. For those born between 1951-1959, your RMD is now due at age 73. If born after 1959, it is now age 75. This means you can delay recognizing taxable distributions, but they will be presumably larger amounts to withdraw. A tax planning opportunity.
This is for educational purposes and should not be taken as tax advice, nor is it personalized for you. You should consult with your tax professional and/or financial professional for more information. The Secure Act 2.0 made approximately 100 changes to retirement account rules and are now subject to IRS interpretation and implementation. Certain provisions must be allowed by your employer to take effect.
The content of this blog is for informational purposes only and should not be construed as investment, tax, or estate planning advice. Skyline Advisors, Inc. is an SEC Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where representatives of Skyline Advisors, Inc. are properly licensed or exempt from licensure. If indices are referenced in marketing material, it is important to note that these cannot be invest in directly, any vehicle such as Passive index-based ETFs and Mutual Funds which attempt to replicate indices have internal expense ratios and other associated costs that would negatively impact returns. No advice may be rendered unless a client service agreement is in place. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.
