529 Changes

Previously, if you saved for your child’s college and they did not need the funds you could either transfer them to another student or withdraw the funds incurring a penalty.

Under the Secure Act 2.0 (SA 2.0) you can now roll these unused funds into Roth IRAs without income tax or any tax penalties.

The law will go into place in 2024, but it does have a transfer limit, the lifetime cap is $35,000.

The funds can only go to the beneficiary, not the parent, and are subject to the annual Roth IRA limits.

The 529 must have been open for at least 15 years before transferring to a Roth. Contributions and earnings that have occurred in the past 5 years are ineligible for transfer to the Roth.

This new law should entice more families to save for the rising cost of tuition for college, where previously investors were hesitant to invest in 529 plans due to the tax ramifications if the funds were not used on education.

RMD Changes

In 2023 the required minimum distributions (RMDs) age is increasing to 73 from 72, and eventually, the age will rise to 75, but not until 2033.

Roth accounts such as Roth 401k and Roth 403b accounts will have no pre-death RMDs, similar to Roth IRA accounts currently.

Missed RMD penalties will be reduced from 50% to 25%, and all the way down to 10% if you correct it within a “timely manner”.

Catch-up Changes

Individuals 60 to 63 years of age will be able to make annual catch-up contributions of up to $10,000 through their workplace plan.

If you made more than $145,000 in the previous calendar year, all catchup contributions will need to be made into Roth accounts.

IRAs currently have a $1,000 catch-up contribution limit for people over 50, starting in 2024, this limit will be indexed to inflation, which could lead to increased limits annually.

Roth Changes

Employers will be able to provide matching contributions to Roth accounts, previously only pre-tax funds were eligible to be contributed.  

The maximum IRA contributions have also been increased for 2023 (not in relation to SA 2.0).

Under 50 can now contribute $6,500 annually and those over 50 can contribute $7,500.

The IRA contribution limits apply to your COMBINED traditional and Roth IRA contributions.

There are many more updates contained in the Secure Act 2.0, here is a shortened 19 page summary. If you would like to view the entire document, click here for the 1,600 page text.

As always, if you have questions, reach out to us either calling, emailing, or by scheduling a meeting here.


529 Changes-CNBC

RMD Changes-401k Specialist Mag

RMD Changes-Forbes

Other Changes-Fidelity