The world of retirement planning can be confusing and challenging to wrap our heads around. The secure Act 2.0 is one of the complicated bills that many have trouble grasping.
We simplify it here and explain how it affects retirees.
The penalty for failing to take a Required Minimum Distribution (RMD) will be reduced significantly from 50% to 25%.
The bill will help us save more money in IRA catch-up contributions by indexing the age limit to 50. This means that those over 50 years can contribute $6000. The catch-up limit will be indexed starting from the year 2023.
Another positive change is that all catch-up contributions are Roth contributions which will help many save more money.
If this bill passes, employees will be allowed to match their contributions as a Roth contribution for 401(k). However, taxes apply as this is part of their gross salary. This optional alternative can save more money on the retirement plan.
The bill has increased the catch-up contribution from $6,500 to 10,000 for those aged 62 to 64. However, they must be participants of the 401(k) program.