Saving with the SECURE 2.0 Act: New options for retirement accounts and more

Since 2022, pieces of the SECURE 2.0 act have gone into effect, helping people with more options to help save for retirement. This year is no different, with a continued rollout of expansions and changes. Here’s a recap of what’s already in effect and what’s coming.

If you’re age 60 to 63, SECURE 2.0 upped the total catch-up contributions you can make, if allowed by your plan.

Starting January 1, 2026, for those age 50 and older who made over $150,000 in FICA wages in 2025, catch-up contributions must now be made as Roth contributions. That money is taxed up front (also called after-tax), but not when it’s taken out in retirement as long as you meet the qualified distribution requirements.

SECURE 2.0 also expanded retirement saving eligibility for long-term, part-time employees. To be considered long-term, you must have worked at least 500 hours in two consecutive plan years. But you can enroll after just two years instead of three years (which was required in the original SECURE Act). Your employer should provide you with an eligibility notice once you’ve met the requirements.

If offered by employer, you can now choose to have employer retirement contributions made as Roth (after-tax) contributions. For example, even if you could make Roth elective deferral contributions to your organization’s retirement plan previously, employer matching contributions were made only as pretax contributions. Of note: Employer contributions that you designate as Roth contributions are considered taxable income in the year they are allocated to your plan account.

Employers with more than 10 employees who have been in business at least three years and start a retirement plan after January 1, 2025, must automatically enroll all new employees at a rate of at least 3% of their eligible pay. That rate increases annually until it reaches at least 10%, and employees can choose a different rate or opt out at any time.

SECURE 2.0 upped the age when you’re required to start taking required minimum distributions (RMDs) from retirement accounts. For those born between 1951 and 1959, you must now take an RMD by age 73, and then every year thereafter. However, the penalty for failure to take an RMD was reduced from 50% to 25%. And, Roth 401(k) accounts are now excluded from the RMD requirement.

If you have a 529 in a beneficiary’s name but don’t need some of those savings to pay education-related expenses, SECURE 2.0 allows you to roll over up to $35,000 into a Roth IRA for that beneficiary. There is a lifetime limit of $35,000, the 529 must be at least 15 years old, and the funds must have been in the plan at least 5 years. In addition, the beneficiary must earn an income.

Some people with student loans may not have room in their budget to save for retirement. SECURE 2.0 lets employers add a student loan match feature to their plan: The employer can make matching contributions for employees who are paying off qualified student loans. (The loan repayments are considered elective deferral contributions to calculate the matching contribution.) Employers are not required to offer this and there’s no match amount requirement. Employees must provide proof of student loan payments.

Employers may choose to add emergency expense distributions. Here’s how it works: If you have “unforeseeable or immediate financial needs relating to personal or family emergency expenses” you may be able to withdraw up to $1,000 from your retirement account per year without incurring a 10% tax penalty. (The amount taken is included as income on your personal tax return and state and federal income tax may be due.) You must repay the amount or make subsequent contributions at least equal to the amount of your distribution, or you will be unable to take further distributions for three years. Check with your workplace benefits contact to see if they offer this option.

Employers can choose a SECURE 2.0 provision that lets employees use up to $2,500 a year from their retirement savings to pay for qualified long-term care coverage. There are limitations on the types of coverage allowed; check with your financial professional or tax advisor for insights.

If you are the beneficiary of an inherited IRA from someone who wasn’t your spouse and you received it after 2020, you must now take regular withdrawals and empty the account by the end of the tenth year following the original owner’s death.

A qualifying longevity annuity contract (QLAC) lets you turn some of your IRA or 401(k) into future guaranteed income, starting at age 55. SECURE 2.0 upped how much you can invest in a QLAC up to $210,000, with no restrictions on what percentage of your retirement savings you can use. Your financial professional can help you decide if a QLAC fits your retirement plans.

If you're 70½ or older and don't need all your retirement money, you can now transfer up to $108,000 from your traditional IRA directly to charity (called a qualified charitable distribution or QCD). While you won't get a tax deduction, this QCD gift can lower your taxable income and count toward your required minimum distribution for the year. 

You can also give retirement savings through other charitable options like special trusts or annuities, which can count as your RMD too. Check with your financial and tax professionals to learn what works best for you.