Highlights of the SECURE Act 2.0

Key Takeaways

1. RMDs Pushed Out
   The age to begin Required Minimum Distributions increases to 73 now and 75 starting in 2033, allowing retirees more time for tax-deferred growth.
2. Lower Penalties for Missed RMDs
   The prior 50% penalty for failing to take RMDs is reduced to 25%, or 10% if corrected quickly, offering relief for taxpayers who make honest mistakes.
3. More Roth Opportunities
   Employer plans can now include Roth employer contributions and Roth options for SIMPLE and SEP IRAs, giving employees and small-business owners more flexibility in how they save for retirement.
4. Catch-Up Contributions Must Be in Roth for High Earners
   Beginning in 2026, employees earning over $145,000 must make catch-up contributions to Roth 401(k), 403(b), or 457(b) accounts, unless their plan does not include a Roth feature.
5. 529-to-Roth IRA Transfers Allowed
   Unused 529 education funds can be rolled into a Roth IRA for the beneficiary (up to a $35,000 lifetime maximum) if the 529 plan has been open at least 15 years, helping families repurpose leftover education savings for retirement.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed in December 2019 and brought many changes impacting retirement planning. On December 23, 2022, the U.S. House of Representatives passed the SECURE Act 2.0 bill that provided additional changes relating to retirement planning and more. To refresh our memories, I am looking back at the specifics, and I am providing a few recent updates.

Required Minimum Distributions (RMDs)

For starters, the age to start Required Minimum Distributions (RMDs) – minimum amounts that a retirement plan account owner must withdraw annually – has been pushed out. It is age 73 (effective now) and age 75 (starting 2033).

Prior to the Secure Act 2.0 passing, taxpayers who had been tempted not to take their RMDs or those that did not know they had to take a distribution, were imposed a penalty. A steep one at 50% that is much higher than the highest income tax bracket! The RMD shortfall penalty has been lowered from 50% to 25%; 10% if corrected in a timely manner.

Retirement Savings

The SECURE Act 2.0 has affected employer-provided plans with new rules encouraging the use of Roths: 

• Starting in 2026 (this was originally 2024) Roth 401(k)s, Roth 403(b)s, Roth 457(b)s, and Roth Federal Thrift Savings Plans do not have RMDs even if you have taken them in the past.
• SIMPLE IRAs and SEP IRAs can have a Roth component. (This is valuable to the self-employed or smaller employers.)
• Employer contributions, like matching and non-elective contributions, have previously only been added to pre-tax accounts. Now they can be Roth and are included in employee income.
• The 2026 maximum contribution to an employer plan is as follows:
• Maximum employee contribution (ages 49 and under):   $24,500
• Catch-up contribution (ages 50–59 and 64+):  $8,000
• Special catch-up contribution (ages 60–63):  $11,500

• For higher earners – employees making over $145,000, indexed for inflation – these conditions must go into a Roth. The $145,000 threshold is based on the previous year at the same employer. Changing employers could give you a pass from the mandatory Roth requirement. 
• This rule applies to 401(k), 403(b), and 457(b) governmental plans, but not to SEPs or SIMPLE IRAs.
• If your plan does not offer Roth contributions, high earners would be shut out from making catch-ups.

529 Education Savings Plans

This “Rothification” even stretches to 529 Education Savings Plans. 529s can now be transferred to a Roth IRA with limitations.  

• The Roth IRA receiving the funds must be in the name of the beneficiary of the 529 plan.
• The 529 plan must have been maintained for 15 years or longer.
• Any contributions to the 529 plan within the last 5 years (and the earnings on those contributions) are ineligible to be moved to a Roth IRA.
• The annual limit for how much can be moved from a 529 plan to a Roth IRA is the IRA contribution limit for the year ($7,500 for 2026), less any ‘regular’ traditional IRA or Roth IRA contributions that are made for the year.
  • Example:  In 2026 you contribute $4,000 to a Roth IRA. You can only transfer $3,500 from a 529.
• The maximum amount that can be moved from a 529 plan to a Roth IRA during an individual’s lifetime is $35,000.
• The child must still have earned income.
• Regular Roth IRA contributions are subject to income limitations, 529 transfers to a Roth are not.
• It is unclear if changing the beneficiary on a 529 restarts the 15-year wait.  

Details on these changes can be found on the IRS website: “Publication 590-A (2024), Contributions to Individual Retirement Arrangements (IRAs)” and “Treasury, IRS issue final regulations on new Roth catch-up rule, other SECURE 2.0 Act provisions.”

The information provided is accurate to the best of our knowledge as of the date of publication. The information provided is for illustration purposes only.  It is not, and should not be regarded as “investment advice” or as a “recommendation” regarding a course of action to be taken. MONTAG employees do not provide legal or tax advice. For specific legal or tax matters, you should consult with your own legal and/or tax advisors. 

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.