As with estate planning, when it comes to retirement, your individual circumstances affect your decisions going forward. Changes to state and federal laws, taxes, and regulations happen all the time, and it’s important to revisit and revise your plans to understand how they could impact your progress toward your ultimate goals and get the most benefit out of your earnings.
In 2023, some big federal-level changes may impact how you save for, and make the most of, your retirement. The provisions especially affect existing retirees and those in lower and middle-income brackets who may or may not have had access to benefits in the past.
We’ll take a closer look at the SECURE Act 2.0, and how it may influence your financial and estate planning decisions to maximize your benefits and bring you peace of mind about your financial future.
Retirement Planning Changes Brought on by the Secure Act 2.0
The initial Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law by President Trump on December 20, 2019. The law came into effect on January 1, 2020. In December of 2022, President Biden signed its “sister act” (2.0) into law, with additional provisions, benefits, and considerations that impact American retirement savings planning.
There are more than 90 provisions to retirement savings plans going into effect with the SECURE ACT 2.0.
Among changes that will begin to take place in January 2023:
- The age of mandatory withdrawal/ Required minimum distribution increased to 73 years of age
- Government match for many low and middle-income workers
- Increased Catch-Up Contributions
- Optional Roth Employer Contribution Amendments
- Employers can link emergency savings accounts to 401(k) plans.
What does this mean if you are approaching retirement age and still working?
Life expectancy has increased, as has the age that people continue to work before retirement. These changes mean that people in their 70s who are still working can contribute to their retirement. Other considerations affecting how people approach their retirement savings include the rising costs across the country, including property tax rates and health care. Current inflation effects have a big impact on how people manage their finances, and it’s important to work with financial advisors, as well as estate planning experts, to ensure you are making decisions that will support you and your loved ones in the long term.
What if you’re in the early retirement planning stages with or without access to an employer-provided plan?
According to a recent report by the AARP, 46 million workers making $50,000 or less, and 11 million workers making more than that, don’t have access to an employer-provided retirement plan. The SECURE Act 2.0 expands and incentivizes employer options to provide retirement plans to their employees.
Beginning next year, the 10% penalty employees under the age of 59.5 have historically faced when making an emergency withdrawal will no longer be in place for withdrawals up to $1,000 annually. However, this rule won’t take effect until 2024.
Additional retirement considerations and features to note in 2023:
IRA Contribution Limits Are Increasing.
The IRS has announced higher IRA contribution limits in 2023, rising by 8%. These changes call on retirement investors to carefully consider adjusting their annual contributions accordingly.
Expect increased Options with Retirement Products and Services.
Whether you’re a small business owner, or an employee expecting changes to your retirement plan as a result of SECURE ACT 2.0, expect that improvements will continue to be rolled out to make plans and benefits more consumer-friendly. This will make it easier to make long-term plans when working with financial and estate planning professionals to stay educated and in control of securing a sound and substantial long-term plan.
Have a Healthcare Insurance Roadmap
Healthcare costs are increasing in expense for those at or around retirement age. Make sure you plan ahead and understand options regarding medicare coverage and provisions to cover any gaps in alternative healthcare coverage.
Make Sure to Review Your Existing Estate Plan
- Review your beneficiary designations to ensure they still match your intended goals.
- Review Trusts with an estate planning attorney so they can advise you of any changes or tax implications for IRAs that are part of a trust.
Consult your professional advisors to guide you through what these changes mean for you.
While new opportunities are projected for many average American families, it’s important to clearly understand what the SECURE Act 2.0 means for you and your loved ones when it comes to retirement planning. Contact Smith Barid today to schedule an appointment to discuss how the SECURE Act 2.0 will affect your estate plan and retirement accounts, and make revisions if needed.