Broker Check



Good news for retirement planning

| February 06, 2023
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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.
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