How the SECURE 2.0 Act Changes Your Retirement Savings

The SECURE 2. 0 Act of 2022 represents the most significant retirement legislation in over a decade. Signed into law in December 2022 as part of the Consolidated Appropriations Act, this legislation builds upon the original SECURE Act of 2019. Introduces over 90 provisions designed to expand retirement savings access and flexibility.

For anyone saving for retirement-whether through a workplace 401(k), an IRA, or both-these changes matter. Some took effect immediately - others phase in through 2027. Understanding the timeline and implications can help savers make smarter decisions now.

Required Minimum Distributions Get Pushed Back

One of the most talked-about changes involves Required Minimum Distributions (RMDs). Before the original SECURE Act, retirees had to start taking distributions from traditional retirement accounts at age 70½. That moved to 72 in 2020.

SECURE 2.0 pushes the RMD age further:

Age 73 for those born between 1951 and 1959 (effective January 1, 2023)
Age 75 for those born in 1960 or later (effective January 1, 2033)

Why does this matter? Each additional year before RMDs begin is another year of tax-deferred growth. For someone with a $500,000 traditional IRA earning 6% annually, delaying distributions from age 72 to 75 could mean an extra $178,000 in total account value by age 85, according to projections from the Employee Benefit Research Institute.

There’s another change worth knowing: the penalty for failing to take an RMD dropped from 50% to 25% of the amount not withdrawn. If corrected within a specific timeframe, the penalty falls to just 10%.

Catch-Up Contributions Evolve

Catch-up contributions allow workers 50 and older to save extra in retirement accounts. SECURE 2. 0 expands this concept in two significant ways.

Higher limits for ages 60-63: Starting in 2025, participants ages 60 through 63 can contribute the greater of $10,000 or 150% of the regular catch-up contribution limit to workplace plans like 401(k)s and 403(b)s. This creates a “super catch-up” window during peak earning years when many workers are most able to save aggressively.

Roth-only catch-ups for high earners: Here’s where it gets complicated. Originally, employees earning over $145,000 (indexed for inflation) would have been required to make all catch-up contributions as Roth contributions starting in 2024. The IRS delayed this requirement to 2026 after acknowledging useation challenges for plan administrators.

For high earners accustomed to pre-tax catch-up contributions, this represents a tax planning shift. Roth contributions don’t reduce current taxable income, but qualified withdrawals in retirement are tax-free.

Automatic Enrollment Becomes the Default

Starting in 2025, new 401(k) and 403(b) plans must automatically enroll eligible employees at a contribution rate between 3% and 10% of salary. The rate must automatically increase by 1% annually until reaching at least 10% (capped at 15%).

Existing plans, small businesses with 10 or fewer employees, companies less than three years old, and church and governmental plans are exempt.

The reasoning behind this mandate is straightforward. Research from Vanguard shows that automatic enrollment increases participation rates from roughly 47% to over 90% in the first year. Inertia works both ways-most employees who are auto-enrolled stay enrolled.

Employees can opt out. But the law bets that most won’t.

Student Loan Payments Can Now Earn Matching Contributions

This provision addresses a real tension felt by younger workers: should they prioritize student loan repayment or retirement savings?

Beginning in 2024, employers can treat qualified student loan payments as elective deferrals for matching contribution purposes. An employee paying $500 monthly toward student loans could receive the same employer match as a colleague contributing $500 to their 401(k).

Not all employers will adopt this feature-it’s optional. But for companies competing for talent burdened by education debt, it provides a meaningful benefit. The average student loan debt for a 2023 graduate was approximately $29,400, according to the College Board.

Emergency Savings Gets a Workplace Option

SECURE 2. 0 creates a new type of account: the pension-linked emergency savings account (PLESA). Employers can offer these accounts as part of defined contribution plans starting in 2024.

Key features include:

Contributions are Roth (after-tax)
Maximum balance capped at $2,500 (indexed for inflation)
First four withdrawals per year are penalty-free and tax-free
Once the cap is reached, excess contributions automatically roll into the participant’s Roth retirement account

The premise is simple. Workers without emergency savings often tap retirement accounts when unexpected expenses arise, triggering taxes and penalties. A dedicated emergency fund within the retirement plan structure addresses this vulnerability.

Roth Accounts Get More Attractive

Several provisions strengthen the appeal of Roth savings:

SIMPLE and SEP Roth options: Self-employed individuals and small business owners can now make Roth contributions to SIMPLE IRAs (starting 2023) and SEP IRAs (starting 2023). Previously, these accounts only allowed pre-tax contributions.

Employer contributions can be Roth: Employers can now allow participants to designate matching and nonelective contributions as Roth. These contributions are immediately taxable to the employee but grow tax-free.

No RMDs for Roth 401(k)s: Starting in 2024, Roth accounts in employer-sponsored plans are no longer subject to RMDs during the original owner’s lifetime. This aligns workplace Roth accounts with Roth IRA rules.

For high-income earners who can’t contribute directly to Roth IRAs due to income limits, the expanded Roth options in workplace plans provide alternative tax diversification strategies.

529-to-Roth IRA Rollovers

Beginning in 2024, beneficiaries can roll over unused 529 education savings plan funds to a Roth IRA. There are restrictions:

The 529 account must have been open for at least 15 years
Contributions made within the last five years (and associated earnings) aren’t eligible
Rollovers are subject to annual Roth IRA contribution limits
Lifetime rollover cap of $35,000 per beneficiary

This addresses a common concern among parents: what happens to leftover 529 funds if the beneficiary doesn’t need them? The rollover option reduces the risk of overfunding these accounts.

Part-Time Workers Gain Access

The original SECURE Act required employers to allow long-term part-time employees to participate in 401(k) plans after three years of working at least 500 hours annually. SECURE 2. 0 shortens this to two years, effective for plan years beginning after December 31, 2024.

For retail workers, gig economy participants, and others working reduced schedules, this change expands access to employer-sponsored retirement savings.

What This Means for Different Savers

Young workers with student loans should investigate whether their employer offers the student loan matching provision. Even if retirement contributions aren’t feasible now, loan payments might earn matching dollars.

Workers in their late 50s should plan for the super catch-up contribution window from ages 60-63. Those four years represent an opportunity to accelerate savings.

High earners over 50 need to prepare for mandatory Roth catch-up contributions in 2026. This changes the tax calculus for annual contributions.

Those approaching traditional retirement age benefit from delayed RMDs, but shouldn’t necessarily wait. Tax bracket management across retirement years often suggests starting distributions earlier than required.

Small business owners have new Roth options through SEP and SIMPLE IRAs that merit consideration alongside traditional solo 401(k) plans.

SECURE 2 - 0 isn’t perfect. Critics note that expanded access means little without addressing the underlying challenge of wage stagnation. Automatic enrollment helps participation rates but doesn’t guarantee adequate savings rates. And the complexity of phased useation creates confusion.

Still, for those positioned to take advantage, these changes offer genuine opportunities to build retirement security more efficiently. The key is understanding which provisions apply, when they take effect, and how they fit within a broader financial strategy.