How the Secure 2.0 Act May Enhance Your Retirement (Part 1)
By Laura Reeves
The Secure 2.0 Act was designed to offer long-term retirement savings options. If you haven’t heard about
some recently adopted changes which will take effect between 2023-2025, now is your chance to get up to
speed and strengthen your readiness for retirement. There is a vast amount of beneficial information, which I
will attempt to sort through in several installments. We’ll start with the most recent changes that are currently
in effect.
RMD Delayed Age- Currently, minimum distributions (RMDs) from your IRA were required at age 72 (an
increase from 70 ½). Effective 1/1/23, Secure 2.0 raised the minimum requirement to 73 and will continue to
increase the RMD age over the next 10 years to 75 years old.
This delay is a huge advantage for those who do not need the money as it allows for your nest egg to continue
to grow tax deferred. One consideration to be mindful of is the tax burden that one might face. Given, the
longer you delay, the more you will need to take out as your lifespan decreases. This may cause a larger tax
liability as well as an increase in Medicare premiums and/or social security taxation if you are still working.
401k Plan Incentives- Some employers may take advantage of a new provision within Secure 2.0 that was
effective December 2022, which allows for small financial incentives, such as a gift card, to encourage
employees to participate in their retirement plan.
Roth Option for SEP and Simple IRA’s- One additional feature, starting in 2023, allows for contributions into a
SEP and Simple IRA’s can now be applied to a Roth within the retirement plan. Given one’s tax situation, this
can be advantageous as the earnings grow tax free vs tax differed (no tax implications at time of withdrawal).
Startup Credit for Businesses- There has never been a better time to consider establishing small business
retirements, such as a Simple or SEP Plan.
The startup credit has increased from 50%, now up to 100% for eligible employees. The credit is
capped at $16,500 and can be utilized for the first three years of implementation. Employers who offer
matching contributions, can now take advantage of a tax credit of up to 100% of employer matches for
the first two years after the plan’s inception, 75% in Year 3, 50% in year 4 and 25% in Year 5.