The Secure Act 2.0 introduces new updates to improve your retirement savings strategy. These changes affect both Individual Retirement Accounts (IRAs) and 401(k) plans. Here are five key updates to know for 2025:

1. Required Minimum Distributions (RMDs) Start Later

• New RMD Age: Beginning in 2025, you'll be able to delay RMDs from traditional IRAs and 401(k)s until age 73. By 2033, that age will rise to 75.
• Why it matters: This gives you more time to grow your money tax-deferred, potentially building a larger retirement fund.

2. Bigger Catch-Up Contributions for Ages 60-63

• Higher Contribution Limits: If you're between 60 and 63, you'll be able to contribute up to $10,000 annually to your 401(k) starting in 2025.
• Important for High Earners: If you earn more than $145,000, these catch-up contributions will need to be made into a Roth account (taxed now, but withdrawals are tax-free in retirement).

3. Automatic Enrollment in 401(k)s

• Automatic Enrollment for New Plans: Most new employer-sponsored retirement plans will automatically enroll employees at a contribution rate of at least 3%, with annual increases up to 10-15%.
• Opt-Out Option: You’ll still have the choice to opt out, but this feature makes it easier to start saving for retirement right away.

4. Emergency Savings Accounts

• Built-In Emergency Funds: Starting in 2025, employers can offer emergency savings accounts linked to your 401(k). You’ll be able to contribute up to $2,500 and withdraw funds tax- and penalty-free for emergencies.
• Why it matters: This offers peace of mind by providing a safety net without touching your retirement savings.

5. Matching for Student Loan Payments

• Student Loan Payments Count Toward 401(k) Match: Beginning in 2025, your employer will be able to match your student loan payments by contributing an equivalent amount to your 401(k).
• Why it matters: This allows you to grow your retirement savings while paying down student debt, making it easier to handle both at once.
  

Bonus:

More Flexibility with SIMPLE and SEP IRAs

• Higher Contribution Limits: SIMPLE and SEP IRAs will have increased contribution limits, allowing small business owners and employees to save more.
• Roth Options Available: Starting in 2025, both SIMPLE and SEP IRAs will offer Roth contributions, giving you additional tax planning flexibility.

Reminder:

These changes are designed to provide more options and flexibility as you plan for retirement. Talk with your financial advisor to see how these updates could help maximize your savings.

This information is for educational purposes only and does not constitute financial advice. Please consult a professional to review how these changes may impact your personal situation. Accurate as of October 2024.