SECURE Act 2.0 offers powerful new ways to save more for retirement

If you're looking for ways to improve your retirement readiness (and who isn't?), there's a sweeping bill to help you start earlier, save longer and make up for lost time. All told, the SECURE 2.0 Act of 2022 (PDF), signed into law last December, contains about 90 provisions, many of which make major changes to existing retirement savings rules.

"A quarter of working Americans have nothing saved for retirement.Footnote ¹ The new regulations are designed to encourage increased plan participation and savings," notes Mitchell Drossman, head of National Wealth Strategies in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank.

"While some changes happen immediately, others take effect over the next several years," says Debra Greenberg, director, Personal Retirement Product Management at Bank of America. "Still, it's a good idea to evaluate whether you're saving enough for retirement and speak with your tax specialist about how you might be able to take advantage of the new law's provisions." Here are some highlights to consider, depending on your stage of life or situation:

Beginning in 2025, you may find yourself automatically enrolled in a company retirement plan.

To help boost retirement savings, SECURE 2.0 requires companies that established retirement plans after the enactment of the SECURE 2.0 Act on December 29, 2022 to begin automatically enrolling eligible employees in 2025. While you may choose to opt out, "automatic enrollment drives home the importance of saving early and often," Greenberg says. "Even a small difference in the amount you save early in your career can make a big difference over time." The chart below may help you set a long-term goal for yourself.

Paying off student loans? You could get help saving for retirement.

"Everyone urges you to save early, but that's hard when you're repaying a sizable student loan," Greenberg says. Starting in 2024, employers may offer matching contributions to retirement plans based on an employee's qualified student loan repayments (up to the amount an employee would be allowed to contribute on their own). While the match isn't required, companies might find that this benefit helps attract promising candidates, she adds.

Got leftover 529 education savings funds? You may be able to jumpstart your beneficiary's retirement savings.

While college costs keep rising, "some students receive scholarships or grants that could leave unspent money in a 529 Education Savings Account started for them," Greenberg notes. As of 2024, that money may be rolled directly into a Roth IRA for the beneficiary of the 529 account without Federal income tax or the usual 10% penalty for non-education withdrawals. Among the restrictions, the 529 must have been open for 15 years and the money to be rolled over must not have been contributed within five years of the rollover.

Larger "catch-up" contributions can help you make up for lost time.

Starting in 2025, "catch-up" provisions for savers aged 50 and over will offer an additional boost for those aged 60 through 63: they'll be able to contribute $10,000 or 150% of the standard catch-up amount (whichever is greater) to 401(k) and 403 (b) plans. For SIMPLE IRAs and SIMPLE 401(k) plans, the limits are $5,000 or 150% of the annual catch-up contribution limit. "After 2025, these increased catch-up amounts will be indexed annually for inflation," Greenberg says. One caveat: Employees earning more than $145,000 will have to make any contributions to a Roth plan, using post-tax rather than pre-tax dollars. Check to make sure that your plan permits catch-up contributions.

You can keep money invested longer.

Anyone turning 72 after January 1, 2023, can wait until age 73 before taking required minimum distributions (RMDs) from their retirement plans and IRAs. That's up from the prior year's RMD age of 72 and 70½ in 2019. By 2033, the age will rise to 75. "The extra time allows you the opportunity to keep more of your savings invested," notes Greenberg. Another plus: The bill reduces additional taxes for failing to take RMDs on time (to 25% of the amount of the missed distributions, down from 50%) and fixes an RMD anomaly for Roth investors. "While Roth IRAs typically don't require RMDs, Roth 401(k) and 403(b) plans do. That requirement ends starting in 2024," Greenberg notes.

Consider giving more to charity.

Even as the RMD age increases, individuals can still make qualified charitable distributions (QCD) of up to $100,000 per year, starting at age 70½. To further encourage giving, the bill calls for adjusting that amount annually for inflation, with the first adjustment coming in 2024. SECURE 2.0 also expands existing QCD rules by enabling individuals to make one-time distributions of up to $50,000 from their IRAs to split-interest trusts such as Charitable Remainder Trusts and Charitable Gift Annuities, starting in 2023.