Todd Talk: Secure Act 2.0 Changes to Retirement Plans

In this episode, Todd Rosenfeld, Chief Learning Officer at STC, explains four Secure Act 2.0 changes that affect retirement plans in 2023. These changes could also have an impact on some of the securities licensing examinations you may take.

Change #1: Increase in Required Minimum Distribution Age (RMD)

The Secure Act 2.0 increased the RMD from 72 to 73. The Secure Act 1.0 increased the RMD from 70-1/2 to 72 but effective in 2023, the RMD went up to 73.

Change #2. Reduction in Penalty for RMDs

Prior to 2023, the penalty for not taking the RMD by the deadline was an excise tax of 50% of the amount that should have been withdrawn. With the Secure Act 2.0, that penalty dropped to 25%. For example, effective 2023 let’s say you were required to withdraw $10,000 for that year. The penalty if you withdrew nothing would be $2,500, or 25% of the $10,000.

Change #3. IRA Catch-Up Indexed to Inflation

The IRA catch-up contribution for people over age 50 is $1,000 and it’s been $1,000 for many years. One of the reasons it has not changed is that it has not been indexed to inflation. Effective 2023, that amount is indexed to inflation and would increase by $100 increments if inflation is above a certain amount.

Change #4. Retirement Plan Take Out Penalty

If you take out retirement plan money prior to age 59-1/2, you’re assessed a 10% excise tax. However, there are a number of ways you can withdraw the money without penalty, and the Secure Act 2.0 adds three items to that list:

  • Qualified birth and adoption expenses
  • Individuals that are terminally ill
  • Anyone who has an issue with federally declared emergencies or disasters

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