“Congress must now act to pass the bipartisan SECURE 2.0 legislation and help more Americans build retirement savings and strengthen their financial security,” the coalition said.
On the RMD front, the original Secure Act increased the age at which workers have to start making withdrawals from their retirement accounts to 72. Secure Act 2.0 would increase it once again to 73 by 2022, to 74 by 2029 and finally to 75 by 2032.
The bill is also rich in catch-up contribution upgrades, allowing people who are age 62 to 64 to contribute an additional $10,000 to their 401(k) or 403(b) plans, or an additional $5,000 to Simple IRA plans. Catch-up contributions for these plans are currently $6,500 and $3,000, respectively, for savers 50 or over.
Beginning in 2023, these catch-up contributions would be taxed as Roth contributions, meaning they would be subject to income tax before being invested for retirement. The bill would also index the IRA catch-up contribution limit of $1,000 to inflation.
A feature of SECURE Act 2.0 that should be useful to wealthier clients would allow taxpayers to make a onetime qualified charitable distribution of up to $50,000 from a qualified plan to a charitable remainder trust or charitable gift annuity. In addition, the onetime distributions will be indexed to inflation. The bill would apply inflation indexing to the qualified charitable distribution (QCD) limit (currently $100,000) for direct gifts to qualified charities.
If SECURE 2.0 passes, “everyone should be looking at this to avoid income and estate tax. It’s a great way to provide income for individuals and ultimately for charity,” Friedman said.