Broker Check



Good news for retirement planning

| February 06, 2023

As expected, Congress has passed legislation that will have significant implications for certain retirement savings plans. We will reach out directly to clients that are impacted, but below is a summary of the changes most likely to impact our clients:

  • Required Minimum Distributions (RMD)
    - Beginning in 2023, the age for RMDs increases to age 73 and increases again to age 75 in 2033.
    - Starting in 2023, the steep penalty for failing to take an RMD will decrease to 25% of the RMD amount not taken, from 50% currently. The penalty drops to 10% if corrected in a timely manner.
    - Starting in 2024, RMD's will no longer be required from Roth accounts in employer retirement plans.

  • Higher Catch-up Contributions
    - Starting January 1, 2025, individuals ages 60 through 63 years old will be able to make catch-up contributions up to $10,000 annually to employer plans, and that amount will be indexed to inflation. One caveat: If you earn more than $145,000, all catch-up contributions are required to be made to a Roth account in after-tax dollars.
    - Starting in 2024, catch-up contributions for IRA's will be indexed annually to inflation.

  • Employer Plans
    - In 2025 all new plans will be required to automatically enroll eligible employees at a 3% contribution rate.
    - In 2024, all plans have the ability to add Emergency Savings accounts for participants. Contributions would be limited to $2,500 annually (or lower, as set by the employer) and the first 4 withdrawals in a year would be tax- and penal­ty-free.
    - The list of exceptions to the 10% penalty for early plan withdrawals has been expanded significantly.

  • College Savings Plans
    - After 15 years, 529 plan assets can be rolled over to a Roth IRA for the beneficiary, subject to annual Roth contribu­tion limits and an aggregate lifetime limit of $35,000. Rollovers cannot exceed the aggregate before the 5-year period ending on the date of the distribution. The rollover is treated as a contribution towards the annual Roth IRA contribu­tion limit.

    Equally important as to what's in the bill are the changes initially included but, thankfully, did not make the final cut.
    - Back door Roth contributions are still allowed,
    - No new limits on who can make Roth conversions,
    - No non-aged based RMD's were added, and
    - No change was made to the age at which clients can make Qualified Charitable Contributions.